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Major currency pairs slipped before a recovery in a move triggered by a EUR/USD slip. Comments by ECB President Mario Draghi from the weekend, along with developments in Greece, drove some volatility for the single currency.
Mr Draghi suggested the ECB is looking to expand its asset purchases, adding that the council was unanimous on the issue. Meanwhile, officials have been talking about a Greek exit from the Eurozone and reports have suggested Angela Merkel is willing to accept a Greek exit.
It is clear the next few weeks will be all about headline risk primarily out of the Eurozone. EUR/USD traded to as low as $1.1864 in a move exaggerated by stops in the $1.2000 region. This was essentially the pair’s lowest trading level since 2006 as it traded through June 2010 lows.
The pair has since bounced back, bringing a sense of calm to forex markets. While we have seen a recovery, I feel traders will now be looking to sell the pair into strength. Moves into $1.2100 present the preferred risk-reward scenario from a selling perspective.