Schlechter Tag gestern für GS...
EUR
Well that was a surprise. The Draghi we saw yesterday was not the same Draghi we heard speak two weeks ago as he was clearly beaten by the rest of the ECB. A lot of pain on what was a sloppy day starting with the incorrect FT leak that there was no cut. The ECB obviously disappointed to what was priced into the market with only a 10 bps cut and only an extension of QE but no additional monthly purchases. The most worrying thing to me however was the 5 descents which to me signals that Draghi has lost control of the council. Liquidity was poor leading to an exaggeration of the move. Of course NFP today where a big number will be enough to settle the nerves of the USD bulls. Look for todays number to dictate the next move, resistance comes in 1.10 to 1.1065 where we have the 55, 100, and 200 DMAs and first small support at 1.0820 with 1.07 the big pivot.
Spot reference: EURUSD 1.0873 View from: Michael Ford
JPY
The market is in recuperation and recovery mode after the ECB inflicted bludgeoning of yesterday. The pain dealt out is reflected in the overnight drop in activity and skittish liquidity. Euro positioning will have been greatly reduced whilst JPY positioning was very light in the first place. We now move towards the next role of the dice with NFP at 1.30pm and USD/JPY sitting comfortably in the middle of its recent 122.23/123.77 range. Its not clear to me that there is a big asymmetry for USD/JPY on this release, though I would be more comfortable buying USD/JPY on a beat of the 200k expectation looking for the rates curve to steepen as we head towards the Fed and with the market now less inclined to be short EUR/USD it could be that long USD/JPY moves up the ranking of those wanting to play the dollar from the long side.
Spot reference: USDJPY 123.75 View from: Jon Pierce
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