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Not only did Draghi flag a possible June rate cut, he also expressed concern about a high euro. The ECB has expressed its readiness to act and this will keep the single currency under pressure in the near term. Data over the coming month will be crucial along with staff projections in coming weeks and any changes to forecast by the ECB. Staff projections are likely to show a downward projection to the inflation profile.
Meanwhile, Russia continues to give mixed signals with Vladimir Putin saying combat training and readiness continues overnight after having said he is pulling back troops from the Ukraine border the other day. With these key risks in mind, it’s going to be hard for traders to justify longs on the single currency in coming months. This is likely to lead to strength being used as an opportunity to sell by most traders. Some key support levels are likely to be tested in euro crosses in the short term.
AUD steady in Asia
Apart from the euro, most risk currencies remain steady with no real catalysts to drive sentiment. AUD/USD continues to hold at around 0.936 despite a disappointing China CPI reading. There is an uptrend line which has been in place since January, which just continues to hold the pair and currently comes in at about 0.93.