USD bulls get cold feet

With last week's ECB decision, USD eased notably versus EUR. The likelihood of asset purchase program being increased again almost fell to zero.

The reduced 10 bp depo rate cut means nothing to the FX market and hardly relevant at all for exchange rates, if the exchange rate moves by 1% or more per day, 10 bp per annum is nothing.

"It therefore makes sense to square the top of the EUR shorts entered into over the past few months. However, we urge caution: the US dollar not only eased against the euro but also against other currencies", says Commerzbank. 

Fed decision is nearing and some market participants are getting cold feet with the pronounced USD longs. Liquidity is declining towards the year-end making choppy moves increasingly likely.

Today's positive US jobless claims or retail sales tomorrow morning should hence easily disperse any concerns on Fed and cause corrections. 

EUR/USD is currently trading at 1.0994.