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Collins: Trading the ECB aftermath

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After ECB President Mario Draghi dropped his strongest hints yet that the bank may move against deflation next month, Alan Collins is looking at trading the aftermath in EURUSD. Alan expects yesterday's "powerful setback" to deepen, at least temporarily.

Alan says: "Although a new 2014 high was posted yesterday the turnaround in sentiment was an aggressive one. In fact the day’s range was the largest for almost 2 month, and net losses the most negative for the same period. Significantly, the 13 day average has been broken, that level has broadly held the downside throughout the last month and a move below has turned 3cAnalysis signals bearish."

Alan is looking at the key area of 1.3775/90 which represents a weekly Marabuzo line and the top of the daily Ichimoku Cloud.

He adds: "I have to admit to being a little nervous to initiate shorts at current 1.3835 levels and instead would look for a minor bounce to the 1.3850/60 area. The risk is assessed as a move above 1.3886."