Good morning,
(Reuters) - The euro came under bearish pressure in Asian trade on Thursday ahead of a European Central Bank meeting that is expected to result in further easing steps, while the kiwi skidded after the Reserve Bank of New Zealand surprised with an interest rate cut.
The New Zealand dollar nursed losses after tumbling more than a cent after the RBNZ's decision to cut its official cash rate by 25 basis points to 2.25 percent, citing a material decline in a range of inflation expectation measures. The central bank also signalled at least one more rate cut to come.
The ECB is expected to cut the deposit rate by 10 basis points to -0.40 percent, announce more asset purchases and possibly introduce tiered interest rates like the Bank of Japan in a bid to boost inflation, according to a Reuters poll published on Monday.
"This is probably not a consensus view, but the market is almost pricing in the entire kitchen sink from the ECB, and I think it's setting itself up for disappointment," said Jennifer Vail, head of fixed-income research at U.S. Bank Wealth Management in Portland, Oregon.
While tighter financial conditions a month ago may have warranted more drastic easing steps, some of those conditions have showed signs of improvement, she said, and therefore she expects only a further cut in interest rates into negative territory and a modest increase in purchases under the quantitative easing programme.
"The size of their response has to be directly related to stress in the market," Vail said, adding that the euro could get a bump higher after the policy meeting outcome.
The common currency was down 0.2 percent at $1.0977 though it clawed back ground against the yen, rising 0.2 percent to 124.86 .
The dollar gained 0.4 percent to 113.26 yen , benefiting from waning risk aversion after data showed inflation in China stronger than forecast.
But the dollar remained well within the range it has traded so far this month.
"The market seems to be very cautious today, ahead of the ECB meeting, and next week, we have the BOJ," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.
In other central bank action, the Canadian dollar gave up some gains made overnight after the Bank of Canada left policy rates unchanged and said its economic outlook was largely the same as in January as recent market volatility "appears to be abating."
While the Canadian currency has firmed since hitting a 12-year low of C$1.4474 in January, it is still significantly weaker than it was a year ago. The greenback was last up about 0.2 percent at C$1.3275.
So today we will continue our journey with B&B "Sell" o EUR. Yesterday was a bit dramatic action, but you should done well, since market has made downward respect of our K-resistance area so, you could move stop to breakeven. Upside action also was to 5/8 Fib resistance...
On daily chart nothing has changed - B&B still in place and we could use it for our posession on short side:
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On 4-hour chart we see that market has tried to break 1.1050 area for 3rd time but failed again:
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This gives us clear pattern finally - it's H&S on hourly chart.
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It's target makes an Agreement with B&B target - 1.09-1.0915 area. So, today ECB meeting that also could shake markets a bit. Thus, let's see what will happen. Recall that our major thought is to use B&B for longer-term possession on bearish side, since there are not bad chances that market could drop further, to 1.05 area.
Still, B&B could be used as isolated setup and traded accordingly.
