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The oscillators are interesting as well, with a bullish crossover on the MACD and stochastics. We’ve also seen a break of the 20-day moving average.
As we enter European trade, the EUR will be widely watched as the European Central Bank (ECB) is due to offer cheap liquidity to European banks in its second Targeted Long-Term Refinancing Operation (TLTRO). This is seen as an essential component in achieving the sorts of balance sheet expansion the ECB had intended.
The market consensus is that banks will take up €148 billion in funds and it’s from here that we can work out the EUR/USD playbook. A take-up significantly shy of consensus could weaken the EUR on the premise that the ECB would need to be more aggressive.
Full-blown government bond purchases could therefore be announced in January. A larger take-up of €200 billion or more would be EUR positive and the momentum could continue.
My sense is that the take-up will be low, but there is no denying that the current EUR/USD set-up is looking more bullish.