The euro dollar is seen bouncing up from earlier losses which is caused by the European Central bankers who have made the decision to cut rates further and roll out sub-zero interest rates. They are doing so because they see low inflation as a threat.

With the ECB providing stimulus, it is seen as helping to help the global economy and is now causing the rally in the US stock market. For the first time, the ECB will be charging banks 0.10 percent for putting funds in the central bank overnight. This is done so as to encourage european banks to loan out the money and help improve the economy as a whole and therefore fight off the risk of a Japan-like deflation.

Draghi mentioned that further measure would be taken when necessary.

In my opinion, putting a negative interest rate on the euro holdings would lead to an exodus from euro zone money markets. Morgan Stanley is expecting US money market funds which have holdings of around 350 billion euros in the euro zone to liquidate some of their holdings which would put pressure on the euro in the mid term.

I would be looking to short the euro as it starts climbing up again now. I will be looking for bearish signals in terms of price action and will look to short at higher levels if this pair climbs higher.

~ Ardy