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ECB meeting and Draghi speech in focus

Four markets in focus today: EUR/USD, US 500, FTSE 100 June and AUD/USD.

EUR/USD

The big event tonight is the ECB meeting at 10:45pm and Mario Draghi’s press conference at 11:30pm AEDT. There are some commentators speculating on a cut to the refinancing rate, while Goldman Sachs even feels we could see a cut the to the deposit rate, to a negative print. A cut to the deposit rate would actually take the rate to a negative number, therefore penalising banks for holding funds with them. The vast consensus believes there will be limited action, although there is the prospect that Mario Draghi talks down the EUR to a degree given the low levels of inflation in the EMU. If Goldman’s call does come to fruition, expect a 150 to 200 pip drop in the pair.

US 500

On the weekly chart there is a well-defined rising wedge pattern, drawn from 2012. The upper trend line comes in at 1913, so despite momentum being to the upside it could be interesting to look at an aggressive short position at 1895, with a stop loss at 1915, for a back to 1860. In US trade today we get the latest services ISM report and the market expects an improvement to 53.5 (from 51.6) on the index. The USD should find good support on this print as well, especially if the employment sub-component shows solid expansion.

FTSE 100 June

The FTSE 100 June contract has now broken the downtrend drawn from the February high and this former trend support comes in at 6577. With momentum favouring further upside I would potentially buy dips in this market down to 6580 with a stop at 6500.

AUD/USD

The swaps market is pricing in 16 basis points of hikes over the coming 12 months from the RBA, so today’s February retail sales (expected to increase +0.3%) and trade balance could be closely watched. The weakness yesterday in commodity currencies was much more pronounced in the NZD after another poor dairy auction, but it seems momentum in AUD/USD has stalled and a break of 0.9214 could see a fairly sharp move to 0.9186 region.

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