EUR/USD rose during the session on Tuesday as the market continues to go between risk on and risk off. The LTRO results come out today, and the market expects to learn that the EU banks borrowed €500 million. The results will certainly have an effect on the markets, but which direction can be tricky. On one hand, if we see a low number, some think it shows a lack of funding. However, you can also say that it shows a lack of funding need, and that could be bullish.
On the flip side of that is the fact that the number could come in high, and this would mean the banks are well-funded suddenly. However, if the number is too high, we could have people worrying about how bad off the banks really area. As you can see, there is no direct way to measure this, and it looks as if we will be better off to wait until the daily close to make a decision.
The 200 day EMA is just above, and a daily close over the EMA and 1.35 level has us buying for a run to 1.40 or so. A break lower could be a sell signal if we break Monday’s lows. In the mean time, we think caution is the better part of valor.
Written by FX Empire