EUR Trading Outlook (22-01-2015)

EUR/USD Tight ranges held in Europe’s morning but NY began the session by applying bull pressure on broad USD weakness and speculation that the ECB will disappoint tomorrow. The pair rallied to the 1.1640/50 area before spec and reserve manager offers pushed the pair a bit lower. The gains were erased in no time though as an EZ source was quoted as saying the ECB executive board proposed bond buys of 50bln per month. EUR/USD dived down to the 1.1560/65 support zone but quickly bounced as the headline also stated the proposed buying wouldn’t start until March. Also noted in a BBG headline was that the buys would go through the end of 2016. The pair spiked to a 1.1680 high but those gains eroded as the USD recovered on a rally in US bond yields. EUR/USD then revisited the 1.156 area. The support held again and the pair lifted towards 1.1600 late in the day. All eyes are now on the ECB and what type of QE, if any, is initiated. If the market is disappointed EUR/USD should see a big short squeeze and the 1.1850/00 zone come into play.