ECB Reaction: Euro crush

22 October 2015/10:25 a.m. ET

ECB President Mario Draghi made it clear he is worried about “downside risks.”  His entire press conference seemed a red-flag to sell euro as he mentioned several times the feedback loop of a higher currency and deflation concerns.  Of course, he can’t talk about currencies and the ECB has no target, but traders took him for what he did say.  He expressed dire concern about deflationary pressures and seemed to layout the case for a big increase in measures to provide more monetary juice to the euro area.  From negative interest rates for bank deposits to increased levels of quantitative easy—all now in the cards. 

The euro, got crushed, as you can see below.  European currencies followed lower, but commodity currencies have rebounded a bit since the initial dollar sharp rally during Mr. Draghi’s talk.  Stocks moved sharply higher in the US and Germany on the additional stimulus expectations.  As expected, Eurozone interest rates plunged—see yield differential page 2.

Next swing support EUR/USD comes at 1.1103; then 1.1004 which might be a level for some consolidation….(see daily chart potential on page 2):

EUR/USD Daily: Bearish View…

EU 2-yr benchmark yield and Spread (EU-United States): Down!