Latest EURUSD Trades Pre ECB

As EURUSD breaks below its 200 DMA ahead of today's ECB decision, traders ask whether the pair show the same action as in April 3-4 and Nov 7-8 -- Rapid declines followed by a gradual rebound-- Or, is this the start of a new downtrend? It is argued that the today's rate cut is well priced in the market and the ground for further declines is limited. But the oppposite camp argues for broadening downturn in euro sentiment, as highlighted in momentum measures and futures net shorts. With the USD index and USDJPY above their 200 DMA and EURUSD below its 200 DMA, the case for USD recovery appears to be in place. Draghi's planned announcement of rate cuts and extending the fixed rate lending window into 2016 may be anticipated, but there is the possibility of opening the door for further measures (LTRO & unsterilized purchases), which may intensify euro's losses. There is also the potential of an upside surprise from US jobs.