The year-end race to push EUR/USD to 1.48 came close enough for the bulls to cash in. Prices have crashed 8 cents in 24 hours as liquidity becomes ever more parched with the approach of year-end. some are pinning the technical move by the ECB to cut the rate it pays on deposits as the catalyst for the route as the move is designed to force banks to begin lending to one another rather than just leave cash under the ECB’s mattress. To me, over-stretched technicals combined with the inability of prices to maintain a perch above the 200 day moving average (yesterday at 1.4713) was the watershed.
Today will likely be a clown show. There is no data on the docket. Last night was christmas party night for those firms lucky enough to have one…dealers are gonna be grumpy and defensive and unwilling to put a price in the market until they have incentive to do so. That incentive will not return until next year as bonus numbers are already decided and there is nothing left to be gained and much to be lost if you screw up.
Technically, 1.3890 is next support, the 38.2% retracement of the 1.2548/1.4717 rally that unfolded since the beginning of December. 1.4185/1.4210 is solid resistance now on rebounds. We trade now at 1.3977 as we consolidate losses.
