Not for the faint of heart this EUR/USD today. Big downdrafts are followed by dramatic rebounds like day follows night. Selling weakness has been a perilous strategy today with the pair quick to reverse losses and squeeze the fresh shorts.
Looking at the big picture, what have we learned today? The US banking system remains very fragile and the European system is not much better. The ECB has vowed not to cut rates in February given the short turnaround between the January and February meetings. having painted himself into a fresh corner (for the second time in as many months), what if the ECB turns around and cuts rates in February. The markets can only take any move along those lines as a sign of abject panic.
Moderating stock losses are helping support EUR/JPY and in turn EUR/USD late in European trading. USD/JPY has been surprisingly well supported all day amid reports of Japanese retail buying. USD/JPY trades at 89.55, EUR/USD at 1.3090 from 1.3028 lows and EUR/JPY is at 117.25.
