European-style printing press, the ultimate hope

The time was close to the beginning of the conference press of Mario Draghi and markets were motionless. A few minutes later, the madness began. The ECB’ president announced a total of  1.1 trillion euros asset-purchase plan which is set to flood the system with 60 billion euros every month through September next year. Which are the results? EURUSD is currently testing the 1.1315 support level while DAX broke the 10550 resistance level. These were predictable movements of the market, but the interesting aspect relates to the speed of reaction of the market participants. It is clear that investors are now more reticent to this kind of announcements. Why? Because SNB removed a large part of market players and also has depleted others. Financial markets need time to recover from this shock and we better expect to see the market repercussions of this event for a long time to come.

What’s next for the Euro currency now that it reached the minimum of the past decade? It still has room to depreciate. It would be extremely interesting to see the EURUSD currency pair approaching the party before a rebound. However, in such a situation is difficult to determine the appropriate support level to be touched, but what do we know for sure? That the European QE is weakening the currency and inevitable the descending trend is nailed by the end of the program.

To continue the long string of shocking news we can observe the immediate reaction of Denmark, which for the second time this week, lowered its deposit rate to minus 0.35% from minus 0.2% after cutting from minus 0.05% on Monday. This decision was preceded by Canada, which on Wednesday also decided to cut its interest rate to 0.75%. USDCAD rapidly rose to the 1.2393 area and technically speaking, it still has room to increase. Which is the fastest conclusion that can be drawn from these events? That there will soon be decided other interest rate cuts. It would be good to have an eye on the New Zeeland and Australian currencies, which reacted immediately to the Canadian interest rate cut and are in the same way affected by the decrease in the price of oil and commodities.

Bank of England’s officials also voted in unanimity to keep the interest rate unchanged starting a battle with the harsh economic conditions which ask for a reduction of the rate. The Sterling Pound against the US dollar broke the 1.5000 support level, which was protected with so much frenzy and now the road is clear to new lower lows.

Today the PMI’s indexes for the Euro zone will be published, which are expected to slightly increase, but it won’t be a surprise to see them collapsing. The Monday opening of the markets may bring huge surprises as on Sunday in Greece will be hold the Parliamentary election. If Syriza is named as the winner, the European currency may start a new episode of depreciation.