EUR/USD: Likely to stick around 1.2500 until the ECB on Thursday
Thanks to some of our institutional friends yesterday in the FXWW chatroom, we discovered that there are some very large expiries in EUR/USD at 1.2500 over the next few days. This will most likely keep the pair stuck within 50/70 pips either side until the ECB statement on Thursday.
The speculative market is very short of EUR and very bearish, but if the ECB comes out with a dovish statement then we will probably see big Sovereign reserve managers start to sell EUR in size. This is the stand-off we are having at the moment. If the ECB is neutral, then the speccy shorts will start covering aggressively.
So EUR/USD sideways until Thursday and then sharp movements one way or the other.