EUR/AUD, EUR/USD Rebounds May Offer Selling Opportunites

Talking Points:

- Euro-Zone CPI at lowest in over four years (0.5% y/y).

- Euro rallies regardless - EURAUD and EURUSD still bearish?

- Economic calendar is stuffed on Monday across the globe.

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The Euro is staging an impressive comeback this morning despite a bout of the worst inflation data in over four years. The Euro jumped from intraday lows against its major counterparts to its daily highs within minutes of the report, despite the theoretical implication that weaker inflation implies easier monetary policy.

The obtuse move - indicative of a 'buy the rumor, sell the news' outcome - suggests that traders remain uncertain and fearful of being too bearish on the Euro ahead of the ECB's policy meeting this Thursday, as history hasn't been kind to Euro bears since the November 7, 2013 rate cut (EURUSD +2.71%, EURAUD +4.99%, EURJPY +7.54%).

The EURUSD outcome is a bit surprising but a bullish bias wouldn't be appropriate until last week's highs near 1.3870 are broken. For EURAUD, the rebound today fits in neatly with our expectation for a small rally last week, and we look towards 1.4995/5010 (head and shoulders neckline) to serve as resistance.

Read more: Big Move Ahead as Euro's Fate Depends on Outcome of ECB Meeting

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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