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Euro eyes $1.25
The euro suffered a sharp fall at the beginning of the overnight session, but the single currency has been recouping its losses as it heads towards $1.25.
The move overnight night was driven by traders taking their profits following the recent US dollar surge as opposed to fresh buying in the euro.
The euro is going to face another tough week as the European Central Bank holds its meeting on Thursday. Even though traders are not expecting any change in the interest rate the pressure is piling on Mario Draghi to make a big gesture.
Last week, Edwald Nowotny of the ECB stated that full blown QE should not be ruled out; traders will be wondering if Mr Draghi shares the same sentiment as the language the ECB chief uses on Thursday will be under scrutiny.
The asset backed securities (ABS) purchase scheme by the ECB will begin this month, and since inflation in the eurozone ticked up to 0.4% in October, Mario Draghi may be tempted to play the wait-and-see game when it comes to QE which could trigger a short-term pull back in the euro.
The euro is still in a downward trend, and if the overnight low of $1.2438 is taken out the next level down is $1.24, which would put $1.23 in traders’ minds. To the upside, a confident move through $1.25 would put $1.2560 (50-hour MA) in sight and the level to watch would be $1.26.