What a day...so big news today, ECB leak revealed a Reverse Operation Twist, bond buying and sterilization of the ECB balance sheet. Key points below:
- ECB bond plan said to refrain from setting public yield caps
- Bond plan to pledge unlimited, sterilized buying
- Plan to focus on 3-year maturities or less
- ECB is considering selling bonds if conditions aren't met
- ECB plan said to have broad council support (although looks like Germany are relatively opposed)
Essentially the key word here is that it is sterilized which means no new money enters the market (sterilized actually means the ECBs assets won't increase), ECB buys and sells (realistically most likely sells Bunds to buy Spanish and Italian bonds) instead of printing money.
The plan ought to work in the short-term, the challenge is that with Spain having outlows of more than $100bn a month there is only so much the ECB can raise funds by selling assets and frankly that won't cover the short fall. Yet again it looks like we have a situation which will buy time as opposed to provide a real solution.
Looking at the bid tone seen in the market initially I think overall excitement caught the wires, we really need to see what comes tomorrow but if this is the long and short of it the this really could be a case of buy the rumour and sell the news. The key probably here is that this solution can't be unlimited if it is sterilized, therefore the market is unlikely to see this as a real bonus especially when Operation Twist and similar strategies (i.e. the Securities Market Program) haven't worked before.
Before jumping on the short though wait for tomorrow, the rate decisions (could we see some action here, I doubt it) and a confirmed signal, additional data could change the overall picture. In a real risk off situation if the market is really disappointed tomorrow then take a look at the aussie as currently this pair seems to be at a much higher level than warranted (we think it should be nicely below parity at the moment), this means it could drop fast.
Interestingly, price action suggest we should position ourselves long, therefore sticking to my plan I will await the announcement to decide my positioning, but given my price action strategy I am more likely to favour long positions.
EUR/USD
Bullish pin bar today off of the 1.25 handle, if we can get a good price on this pair then it would position us long (this was after all the signal we were waiting for), that said I would want to wait until after the event risk tomorrow before taking this position as any disappointment will reverse this quickly.
GBP/USD
Price tested resistance today and popped above. If this holds tomorrow we could look for a slight retracement to put us long. 
AUD/USD
Interesting that the aussie dropped today when the pound and euro rallied. We still think the aussie is overpriced here so not entirely surprised. We like aussie shorts if news out of the ECB tomorrow really does disappoint.
USD/JPY
Managed to do almost nothing today despite the excitement, zzzzz...the range continues to hold. 
GBP/JPY
Pushed slightly higher but struggled to hold these prices, we really need a break of the 125 handle to keep this trade going. Careful with event risk tomorrow.
NZD/CAD
Pushed higher in the risk-on trade and actually hit our tightly trailed stop. We are now out of this one for a very healthy profit. 