By John J Hardy
The European Central Bank's Ewald Nowotny was out over the weekend with remarks that look less aggressively dovish than what we saw as recently as Thursday of last week, particularly regarding the timing of any new ECB measures, as he stated that "it's too early to talk about this because we still have to wait almost a year til September next year". He also echoed past remarks from the bank's president, Mario Draghi, on the need for structural and fiscal policies to boost growth. This is where the medium- to long-term focus lies, with Italian prime minister Matteo Renzi's recent request to Brussels to allow EUR 35 billion in tax cuts the first political showdown on this front. More to come on this front, particularly if EURUSD stays higher!
USD: found support at key structural levels in some of the major pairs last week, but unsure where the catalyst lies in the nearest term amid a dearth of fresh US data until at least next week. Focus is more on Europe and the euro this week.
EUR: ECB president Draghi will try to talk up the bank's credibility on more policy action without enacting new policy - at least that's our default view for this week's key ECB meeting. Prefer EURUSD lower, but would like a close below 1.1300 to shift the reversal into a higher gear.
GBP: EURGBP offering one of the more compelling setups last week with the big bearish weekly candlestick (dark cloud formation). This keeps the focus lower this week as long as we remain below 0.7400 with potential toward 0.7250/00.