Yesterday’s mixed U.S. inflation figures did not serve us well in terms of profitable trades as the dollar choppily whipsawed without a clear direction. This has led to a false breakout in both EUR/USD and GBP/USD. While the core inflation gauge was in line with estimates, the 12-month reading came in slightly higher than forecast. Traders are mostly anticipating no monetary action from the Federal Reserve next week with a view to a possible hike in November.
Today, the European Central Bank will decide whether to hike rates again amid worsening economic conditions in the Euro Area. Sources have suggested the ECB policymakers are about to upgrade their inflation outlook for 2024 to above 3 percent. This would mean a hawkish repricing of rate hike expectations. In short, it is now a 50/50 chance on whether the ECB raises rates today or not.
From a purely technical view, we now see short-term momentum in favor of the dollar, but if the ECB hikes today, the euro will rally.
The ECB decision is due at 12:15 UTC followed by the press conference 30 minutes later.
In case the euro rallies, the next target is at 1.0835, while slipping below 1.0685, the next lower target is seen at 1.0630.
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Disclaimer: All trading ideas and expressions of opinion made in the articles are the personal opinion and assumption of MaiMarFX traders. They are not meant to be a solicitation or recommendation to buy or sell a specific financial instrument.