ECB to keep inflation below 2%, while Poloz prepares to keep policy “quite simulative”

Euro (December)

Session close: Lost 30.5 ticks and settled at 1.17935

Fundamentals: The euro finished the session lower after the ECB kept inflation expectations below 2% through 2020. They did raise growth expectations through the same time frame, however, inflation is viewed as the key catalyst for a rate hike. This morning we saw robust Manufacturing and Composite data out of all regions in Europe and the growth story is there. Our bullish thesis relies on a weaker dollar which we began to see yesterday and stronger growth that will force the ECB’s hand into a hawkish bias in the first quarter of next year. Strong U.S Retail Sales today helped stop the euro before ECB President Mario Draghi ultimately turned the tape. The data front takes a breather tomorrow, but we still have Industrial Production out of the U.S at 8:15 am CT. Developments in tax-reform will be key and push the dollar in the near term.

Technicals: Price action failed just shy of 1.18785 before reversing sharply. The 1.17215-1.1730 major three-star level is what traders need to watch and as long as this hold we believe the Euro will set up with a strong buy opportunity.

Bias: Bullish/Neutral

Resistance –1.18645 1.1878**, 1.1925**, 1.19975-1.2019***, 1.2154-1.2180****
Pivot - 1.1818-1.1820
Support – 1.17215-1.1730***, 1.1672**, 1.15785*, 1.1481-1.15***


Yen (December)

Session close: Gained 24.5 ticks and settled at .89145

Fundamentals: Considering strong retail sales and euro weakness, today was a fairly disappointing session for the dollar and we believe this is very favorable for the Yen. Yes, the Yen did not see much of a follow through on today’s session but again considering the U.S data, it held very well. The question mark right now is the equity market on the close and if doubts continue to swirl around tax-reform we believe the Yen is in the perfect position to capitalize best. Tonight, we have key Manufacturing data out of Japan at 5:50 pm CT.

Technicals: Price action ran a high of .89245 and failed against resistance at the .8934-.8941. It has settled back in and remaining above the .8886-.8890 level, we will watch this level into the weekly close in order for the bulls to maintain a slight edge.

Bias: Bullish

Resistance - .8934-.8941**, .9018-.9045***
Pivot - .8886-.8890
Support -.8845-.8863**, .8790-.8801**, .8730***

Page 1 of 2