Trading the EURUSD in 2016 has been a nightmare!!!
Since the beginning of the year we seen the EURUSD super choppy, we haven’t had a clear direction of what the winning side is.
Janet Yellen dovish or bullish? USD rally might come to a stop.
Also Janet Yellen’s been very dovish after the initial hike and it has put a major stop on the USD pretty much 12 month rally. If we take a look at the data, or GDP has been coming out weeker than expected, however we been getting very strong NFP data. If we look at the Fed Fund futures currently pricing in one hike in 2016 and the probability still pretty low. if we look at the Fed members they believe we should be doing a rate hike now, but if you read the FOMC minutes you will notice there is a lot of disconnect from all of the FOMC members. The US data is showing a slow down the FED doesn’t see it that way, but if you look at the payrolls and see all the jobs add it most of them are low wages.
Draghi is running out of ammo QE is not working in the EU
Looking at the ECB, this guys are doing QE that is because if you listen to Draghi’s when they are doing the Q&A he always talks about the Euro Zone inflation, and he will be using every tool he has in his tool box to make they have the levels of inflation he mention before. He has hinted that after we had that Brexit the ECB might make changes to their monetary policy, that typically means they will lunch more easing.
Base on the divergence from the FED and the ECB our bias will remain short the EURUSD for now.