Yesterdays Lisbon debt auction saw healthy demand for both the 3 and 10-year bonds with the average yield on the 10-year lower, compared with a previous one in November, Euro began a basing pattern on the 5min Chart Soon after the auction which then lead to prompting a positive reaction in markets .
The game is not over for sellers and they will look to continue the downward trend in a second leg lower. Bears will look to re-break 1.3050 and from there they will be on track to challenge 1.2963. This level would be the last stand for desperate buyers and a break here would quickly drop the market towards new lows at 1.2869; a high probability outcome given the renewed downward momentum.
However Buyers will be temporary satisfied with the strong retracement from last week’s sell-off, but all the hard work is still to come. Bulls need to build a strong supportive base above 1.3157 before being able to test higher ground.
Sellers should not become complacent as the move was quickly rejected EUR/USD March future printed a new monthly low at 1.2869, yet the sell-off was short-lived and the Euro aggressively bounced back through 1.3050 resistance. Sellers need to keep the price below 1.3050 to maintain a dominating presence in the market.
Should make for an interesting day ahead Throughout the press conference traders should be aware of the key points Trichet will discuss regarding ECB bond buying, escalating inflation and the ECB liquidity REFI operationsand and how both the market and you will respond to Trichet’s comments 🙂
Also take note of Russia and China Selling this morning in the 1.3170 area .
Have a good one Traders