Euro Gets Pounded

The euro crashed yesterday as the ECB announced an extension of their QE program till the end of 2017. The program was supposed to end in March 2017 and though the market was not expecting an abrupt end to the program in March 2017, it also was not expecting an extension till end of 2017. This opened the floodgates as the bears came flooding in and the EURUSD pair, though it made a brief trip towards 1.0875, immediately crashed and broke through 1.0700 and sits near 1.0600 as of this writing. We expect some more weakening in the euro and the region around 1.0500 would be crucial for both the bulls and the bears in the short term.

The bulls would now be looking towards the Fed meeting next week where the Fed is expected to hike rates. But this hike is already priced into the markets and so they would be looking to see if the Fed provides some hints of when the next hikes would be. We had the same scenario last December when we saw some unexpected dollar weakness after the announcement and the euro bulls would be expecting some more of the same this time as well. If not, they are going to have a very tough time holding up the euro and EURUSD might then be heading towards parity.

In other news, oil prices began their next bullish leg as we near the meeting between the OPEC and non-OPEC producers to discuss on the deal for production cuts. Any announcement of a deal between them could push oil prices towards the mid 50s but the real challenge would come next year when the deal is implemented and we have to wait and see how much of an effect it actually has on the supply and demand.

For today, we do not have much news that can cause major volatility in the financial markets and so we can expect some profit taking and consolidation for the rest of the day.

 
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