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ECB Decision Proved To Be Another Non-Event For Traders

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The euro’s weak performance following the European Central Bank decision illustrates what the market thinks about the ECB’s decision: There is nothing particularly new but empty rhetoric.

“The lady isn’t tapering” ECB President Christine Lagarde told reporters in Frankfurt, describing yesterday’s central bank decision “a recalibration of the pandemic emergency purchase program for the next three months.” The ECB will slow the pace of its pandemic bond-buying program in the final quarter 2021 but signaled policymakers are not yet ready to discuss ending the measure.

The next crucial ECB meeting for future guidance will be on December 16.

For traders yesterdays’ ECB meeting turned out to be once again a non-event with the EUR/USD swinging directionless between 1.1850 and 1.18.

As long as the pair remains between 1.19 and 1.1750 there is nothing new to report.

The GBP/USD looks set to continue its bullish move towards 1.3950. Only a renewed break below 1.3730 would change the picture in favor of the bears.

Have a good weekend everyone.

We wish you good trades!

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ECB Decision Day: No Chance For Big Moves?

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The U. S. dollar ticked slightly higher Wednesday and sent both of our major currency pairs to short-term support levels which have proved to hold so far.

Elsewhere, we got a profitable breakout in the DAX yesterday after the 15700-support level was significantly breached to the downside. Our short entry at 15790 has thus proved highly profitable. Lower supports are now seen at 15430 and 15300.

It’s decision day at the European Central Bank. The European economy is growing faster than was anticipated, but is it enough for policy makers to phase out the central bank’s crisis support? Maybe, but maybe not at this time. The ECB is seen to have more flexibility than the Federal Reserve in maneuvering monetary policy. ECB policy makers could thus be on track to retain the current policy. For the euro to rise it would require a clear exit strategy and a material shift in the ECB’s forward guidance. If the central bank retains its current monetary policy path, the euro could fall on disappointment.

Generally speaking, we do not expect fireworks today. We will prepare for potential price breakouts but do not anticipate exaggerated movements.

The most interesting part for traders will be ECB President Christine Lagarde’s press conference due at 12:30 UTC.

EUR/USD

The pair has been in a downward trend channel since May 2021. Based on that channel we anticipate lower targets to be at 1.1750 and 1.17. Euro bulls on the other side should watch out for a break above 1.1910 in order to buy euros towards 1.1980.

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From Fed Taper To ECB Taper

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U.S. Nonfarm payrolls disappointed last Friday with only 235,000 jobs created in August.

The U.S. dollar sold off in an imminent response to the report but the greenback’s decline was limited after several days of weakness while bigger currency movements remained absent.

Despite the weaker than forecast job growth, average hourly earnings rose 0.6 percent last month, bolstering the dollar as hawkish Federal Reserve officials might sound the alarm. Speaking of a taper, traders now shift their focus to the November 2-3 FOMC meeting after policy makers have one more report from September in hand.

EUR/USD

The euro’s recent climb cannot be solely attributed to the dollar’s weakness, but also to speculation that the European Central bank is considering its own taper timeline.

According to economists surveyed by Bloomberg, the European Central Bank will start slowing down its pandemic bond purchases in the fourth quarter and may not exhaust the whole 1.85 trillion-euro program before it ends next year.

On Thursday, ECB policy makers will have to decide when to shift the institution away from its crisis mode. The inflation outlook now warrants stepping back stimulus, with inflation jumping to 3 percent, well above the ECB’s goal. The hawks have been very silent during the crisis phase but now as ‘normality’ is coming back, they could try to convince the doves to slow down the pace of asset purchases. More cautious policy makers will try to keep the focus on the uneven nature of the economic recovery and the risks from the delta strain.

The greatest danger comes however from a missing agreement between ECB policy makers and the risk that by December or January they still haven’t come to an agreement.

Technically, the euro touched its range resistance around 1.19 and traders wonder whether this could be the limit. Ahead of Thursday’s ECB decision we expect some corrective movements towards at least 1.1830 and eventually 1.1750. A break above 1.1910 however, could spur bullish action towards 1.1950 and 1.1980.

GBP/USD

The cable reversed shy of 1.39 whilst entering overbought territory. As long as the pair remains below 1.3930, we favor consolidative movements between 1.39 and 1.37.

U.S. markets are closed for the Labor Day holiday today but volatility is expected to pick up materially after the holiday.

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EUR/USD: Will The Euro Surge Post ECB?

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While traders saw a rebound in the GBP/USD on Wednesday, the EUR/USD has been treading water with prices ranging between 1.18 and 1.1750.

Today, however, could be different for euro traders as the European Central Bank will outline how their new inflation strategy affects their guidance for future monetary policy. After having agreed on a higher inflation goal, ECB policy makers will have to adapt their language on interest rates and asset purchases. Today’s discussion will thus pave the way for the possibility of taper talks in September. ECB officials repeatedly cautioned against withdrawing emergency stimulus too soon, which is why chances still remain in favor of the doves and thus in favor of a normally weaker euro. However, much of that dovishness is already priced in and market participants do not appear to be expecting many fireworks. The impact on the EUR/USD will however hinge on the ECB’s communication changes.

The ECB decision is scheduled for 11:45 UTC, followed by a virtual media briefing from President Christine Lagarde 45 minutes later.

EUR/USD

Technically and looking at larger time frames the pair appears to be oversold while bearish momentum faded around the 1.17-support and stochastics confirm an oversold situation. In short, this picture could predict an upcoming upward movement towards 1.19 and 1.20, provided that crucial support zone at 1.17 and 1.16 remain unbreached.

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What To Expect From Today’s ECB Decision?

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The coronavirus angst returns back to the market while the biggest wave of infections is currently seen in Asia and India. The U.S. dollar, however, has not significantly benefited from safe-haven flows – at least not until now. While Europe is currently less severely affected by new infections, the risk of spreading casts a shadow over the global economic rebound. In the end, the pace of vaccinations and the vaccine’s efficiency against variants over the coming months will dictate the recovery.

Investors rewarded currencies with better track records of managing the outbreak, such as the Israeli shekel or the British pound. Also, the euro showed evidence of resiliency with the EUR/USD holding above 1.20 ahead of today’s ECB decision.

All eyes will be on the European Central Bank decision today at 11:45 UTC, followed by the ECB’s press conference 45 minutes later. It is expected that the ECB will keep its policy unchanged, confirming that asset purchases will run at a faster pace until June. Today’s decision will be of particular interest after the Bank of Canada became the first major central bank to signal the tapering of asset purchases and faster rate hikes. However, the ECB is trapped in a situation in which high coronavirus infections are forcing tougher restrictions while at the same time, progress on the vaccine front allow for optimism that a rebound is near. Growth and inflation projections are however not available until the ECB’s next meeting in June, which is why today’s meeting is unlikely to act as a game changer.

The focus is however on the tone of the press conference and if there is any hint of a hawkish shift, the euro will rise. A next higher target is 1.2110, whereas on the downside, the 1.20 support remains in focus. If the euro falls below 1.1990, it may extend its slide towards 1.1950 and possibly even 1.1880.

We wish you good trades!

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Draghi Is Unlikely To Signal Early Exit From The ECB’s QE Program

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Dear Traders,

As expected, the euro rejected the 1.2450-level in a first attempt but the single currency was able to hold above $ 1.24 ahead of the upcoming ECB monetary policy announcement. While no changes in interest rates are expected, the focus will be on a fresh set of economic projections and ECB President Draghi’s commentary on what could happen to the central bank’s QE program which is due to run until September.

There is still a high degree of ECB optimism in the market and given that optimistic sentiment market participants may tend to push the EUR/USD higher even though Mario Draghi is unlikely to signal an early exit to their QE program. Traders should bear in mind that making significant adjustments to their communication right now could cause confusion which is why ECB policymakers could maintain a cautious stance for the time being. Mr. Draghi is not in a hurry to announce a change right now. Therefore, the ECB could hold off until the summer to start talking about unwinding QE and tell the market when rates will begin to rise.

The ECB will announce its rate decision at 12:45 UTC, followed by the ECB’s press conference 45 minutes later.

EUR/USD

The euro is still calm but, as usual, we will prepare for heightened volatility during the day.

For bullish momentum to continue we would need to see a break above 1.2480 and 1.25. A higher target could then be at around 1.2560. In the chart below we have sketched out potential support areas which could be tested in case of a bearish twist. The nearest support comes in at 1.2350 from where buyers could swoop in – depending on the ECB’s commentary.  A break below 1.2330 could send the euro lower towards 1.2280.

Let us be surprised.

GBP/USD: The price action in the cable is still messy with the pair struggling to find a clear direction. Yesterday we saw the pound confined to a small trading range between 1.3910 and 1.3845. In terms of profitable trading opportunities, the recent price development leaves much to be desired for day traders.

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We wish you good trades and many pips!

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Euro And Pound Sell-Off, Focus Now On U.S. GDP Data

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Dear Traders,

The EUR/USD sold off on the back of a dovish ECB announcement on the one side and a strengthening U.S. dollar on the other side. European Central Bank policy makers agreed to cut monthly bond purchases in half to EUR30 billion in January but extend the bond buys at this pace until September 2018. While this outcome was exactly what the market has anticipated, Draghi said there won’t be a “sudden end to the buying” and the shift shouldn’t even be called tapering. What weakens the euro was the fact that a “large majority” of ECB policy makers favored keeping the bond buying program open-ended so they can adjust it at any time in case inflation stays sluggish. With regard to future interest rate hikes, Draghi said that rates will remain “at the present levels for an extended period of time, and well past the horizon of our net asset purchases”.

In short, the ECB’s decision can be described as slightly more dovish than euro bulls may have hoped for.

As regards the U.S. dollar, prospects for the U.S. tax reform spurred the dollar rally. The U.S. House passed a budget resolution unlocking a process to cut taxes by the end of the year. The greenback experienced broad-based gains versus other major currencies but the focus now shifts to the third-quarter GDP reading, scheduled for release today at 12:30 UTC. Even though economists are looking for slower growth of 2.6 percent, dollar bulls may take this opportunity to jump back in on pullbacks. Traders should prepare for heightened volatility around the GDP release.

EUR/USD: The euro cleared its crucial support at 1.17 and even 1.1650. After breaking below theses support levels, the case has built up for the bears and we now expect the euro to tumble towards 1.1550 but maybe not straight-lined. Former support levels could now turn into resistances with pullbacks may be limited until 1.17/1.1730.

GBP/USD

Only yesterday we have talked about the pound’s bullish break above 1.3230 which seemed to indicate further gains towards 1.33 but the opposite happened: The pound fell in tandem with the euro and headed for another test of 1.3110. If the 1.31-support breaks the previous bull breakout above 1.3230 turns out be a fake-out. In case the cable falls below 1.3085 we anticipate further losses towards 1.3030 and 1.2950.

We wish you good trades and a relaxing weekend.

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We wish you good trades and many pips!

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ECB Decision Day: Hawkish Or Dovish Taper Mr Draghi?

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Dear Traders,

It’s decision day at the European Central Bank and traders in all EUR crosses brace for heightened volatility at this highly anticipated event that will bring forth news on the pace of the ECB’s quantitative easing program (QE). The euro traded higher against the U.S. dollar ahead of today’s announcement since the ECB is expected to announce a reduction in the size of its monthly bond buying. While this expectation alone is considered euro-positive, the devil is in the details. There are a number of possible scenarios while the best (but most unlikely) scenario for the euro would be a reduction of EUR40 billion bonds buys until September 2018. The most likely scenario is however a taper of 30 billion euros with a nine-month extension of the QE program. Since the latter scenario is already largely priced in the euro’s price development, the risk is tilted to the downside if the ECB fails to surprise the market. Bearing in mind that ECB policy makers want to avoid a too strong euro they need to be careful in their statement. If the market senses a more cautious approach towards monetary policy normalization or in the case of a reduction of only EUR20 billion bond buys per month, the euro could fall.

Whatever the case, the good news is that ECB President Mario Draghi can be expected to emphasize that the Eurozone economy is in a good shape and probably capable to withstand tighter monetary policy over the medium-term.

The ECB’s decision will be announced at 11:45 UTC and Draghi will speak 45 minutes later.

EUR/USD

The euro currently trades around the resistance line of its recent downtrend channel near 1.1840. If the euro breaks above this barrier, the focus will shift to the 1.19-level. A sustained break above 1.1915 is needed to encourage euro bulls for a run for 1.20 or 1.21. If 1.19 however holds, particular focus remains on the 1.17-support. A renewed break below 1.1680 and 1.1650 could send the euro towards 1.1580.

The British pound rose on upbeat U.K. GDP data that bolstered the case for a Bank of England rate hike next week.

From a technical point of view, the primary uptrend channel finally proved correct and suggests that we may see further gains towards 1.33 and 1.3350. A break above 1.3365 would brighten the bullish outlook. A current support is however seen at 1.3150.

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We wish you good trades and many pips!

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Profitable Trading For Euro Bulls, Now What?

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Dear Traders,

There was nothing stopping euro bulls from pushing the euro beyond 1.20 despite the absence of changes in the ECB’s monetary policy. The euro owes its recent appreciation in large part to the further improved outlook for economic growth in the Eurozone. The European Central Bank upgraded its forecast for growth this year to 2.2 percent, which is the fastest pace in a decade. While the ECB refrained from reducing asset purchases this time, Mario Draghi did suggest that decision on the quantitative easing program (QE) could be made next month. The strength of the EU economy has prompted the market to discount a policy shift, which is most obvious in the strong uptrend of the EUR/USD. While the currency pair has already charged remarkably high, the level of intervention rhetoric from the ECB was too mild to prevent euro bulls from pushing the single currency higher. Moreover, when coming to the currency’s sharp appreciation, Draghi didn’t seem overly concerned.

In other words, there was nothing in the way of further euro strength since the ECB will start tapering and if not today, then certainly next time.

Furthermore, the U.S. dollar continues its downtrend. Market participants are concerned that the impact from Hurricane Harvey and now Irma are causing data distortions, and thus, undermine the chances of a year-end Federal Reserve rate hike.

EUR/USD

We got what we have been looking for: A breakout of the euro’s narrow trading range. Our yesterday’s long entry has proven to be sustainably profitable. We now focus on a next target at 1.2135, from where we may see some pullback. On the downside, we expect the 1.20-area to lend a support for the time being. However, bear in mind that the pair approaches overbought territory, a fact that increases the chances of a reversal.

GBP/USD: The pound sterling headed for 1.3150 on the back of broad-based dollar weakness. Sterling bulls were able to gain a good profit by using our long entry at 1.3061. Once the cable breaks above 1.3165 we will shift our focus to the August high near 1.3270. Important supports are seen at 1.3050 and 1.30. Traders should keep an eye on the U.K. data (Industrial Production, Trade Balance) at 8:30 UTC.

We wish you good trades and a nice weekend!

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We wish you good trades and many pips!

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Will The Euro Rise Or Fall? Waiting For Draghi

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Dear Traders,

It’s decision day at the European Central Bank and traders are eagerly awaiting ECB President Draghi’s comments. Today’s ECB meeting is a very important event as it is expected to provide clarity on the withdrawal of stimulus. The majority of analysts expect Mario Draghi to delay announcing a timetable for cutting its monthly bond purchases at this meeting. The reason is the strength of the euro which may prevent the central bank from announcing a big change in monetary policy. Moreover, improving economic conditions in the Eurozone are likely to balance out near-term concerns over the euro’s strength. Ongoing EU improvements thus give room for the ECB to forego an announcement of a QE taper. If the ECB downplays tapering, the euro could fall. In the bullish case of a surprise announcement particularly a reduction of 30 billion or more, the euro will further rise. Whatever the case, the central bank has little choice but to cut asset purchases by next year, simply because it has no more bonds to purchase. In a first step, the ECB could reduce its monthly purchases to 40 billion from 60 billion which could happen at the start of 2018.

It all depends on Draghi’s rhetoric but even in the case of a dovish announcement, the medium-term trend is towards euro strength.

The U.S. dollar, in contrast, has become incredibly oversold. So any disappointments on the Eurozone front would be sufficient to trigger a correction in the EUR/USD, even though a setback may not last very long. Let’s be surprised.

The European Central Bank decision is scheduled for 11:45 UTC, followed by the highly anticipated ECB press conference 45 minutes later.

The euro traded virtually unchanged against the U.S. dollar while the price action of the EUR/USD was limited to a tight range between 1.1950 and 1.1910. We are still waiting for breakouts of that narrow range and prepare for larger swings today. Above 1.1960 the euro could head for 1.2120. Below 1.1890 it could fall back towards 1.18 and possibly even 1.17.

We wish you good trades!

Daily Forex signals:

Additional daily and long-term entries are available for subscribers.

View our daily signal alerts https://www.maimar.co/category/daily-signals/

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We wish you good trades and many pips!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2017 Maimar-FX.

www.maimar.co