From ECB to NFP

The euro licks its wounds ahead of the US Non-Farm Payrolls after Thursday's sharp downward revisions from the ECB. The central bank pushed out guidance and announced a new round of targeted loans in a series of moves that put the euro into a tailspin. The yen is the winner of the day after intensifying risk-off phase in indices. Canadian and US employment data is coming up next. The EURUSD premum short was stopped out by 3 pips (1.1177 low vs 1.1180 stop), while the short DOW30 was closed for 400-pt gain. A new Premium trade has been issued moments ago.

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We warned yesterday that an extension in the ECB's forward guidance was overdue but they had hinted at a reticence to make a change so few economists were forecast a change. Draghi decided to be more aggressive as the latest ECB forecasts cut the growth estimate this year to 1.1% from 1.7%.

In response, the ECB pushed out guidance on rate hikes through the end of the year and announced TLTROs. What was especially concerning was a warning from Draghi that risks remain tilted to the downside on growth and inflation. There were also reports afterwards that some governing council members believe growth is even softer.

A fall in the euro wasn't surprising but the way it cut through the 2019 and 2018 lows – both major support levels – is telling. The euro closed at the lowest since June 2017.

In the bigger picture, the US dollar and yen were broadly stronger as risk aversion hit again. The S&P 500 fell back below the 200-day moving average. In FX, the dollar and yen are beginning to clear key medium-term levels. Notice that SPX is testing its 200-DMA, while the DOW 30 remains 200 pts away above its 200-DMA, a situation, which could suggest that DOW30 may extend to 25130 before stabilizing.

With the recent pickup in risk aversion Friday's non-farm payrolls report bears closer watching. The consensus is for a 180K reading after the 304K jump in January. The risks are that a downside miss intensify the latest round of worries and hurt USD/JPY.