Euro Finds Renewed Bids But Price Action Still Classified as Corrective

Risk correlated assets finding renewed bids
German plans to strengthen Spanish banks inspire confidence
ECB Draghi says the central bank is ready to act if necessary
EUR/USD next key resistance comes in by 1.2625
Bank of England rate decision due later today

Risk correlated assets have been very well bid over the past few sessions, with currencies and equities reversing sharply as market participants are able to let go of the worst of their fears for the time being. The doom and gloom sentiment that had taken hold in the previous week has faded and investors are once again warming up to the idea that the Eurozone may be able to escape the current crisis and avoid breakup. News that Germany is drafting plans to strengthen the Spanish banks without expecting further reforms or any formal aid deal has been seen as a huge positive and this has been once of the primary drivers of this latest risk-on trade.
Although the European Central Bank left policy on hold as was expected, comments from ECB President Draghi that the central bank is willing to act if necessary have also been helping to bolster sentiment. The Euro now eyes a retest and break of the previous weekly high by 1.2625, while the Yen has also been very well offered on the liquidation of safe haven plays. Still, at the end of the day, this is a market that had been in desperate need of technical correction following some intense risk-off moves, and at this point, we would attribute the recent price action more to the technicals than fundamentals.
European leadership will really need to dig in and come up with some serious plans to resuscitate the region for there to be any hope of a sustained Euro recovery. Until then, the strategy should be to look to sell these currency rallies into additional strength. Looking ahead, the Bank of England is slated for a rate decision later today. While no policy change is expected, there is a good deal of speculation that the Bank of England will shift to a more dovish stance in light of the ongoing pressures in the global macro economy.