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ECB Decision Day: Hawkish Or Dovish Taper Mr Draghi?
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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Market Listens To Draghi: Tapering Or Expanding Stimulus Plan?
Dear Traders,
Top event risk for the upcoming session is the European Central Bank meeting and ECB President Draghi‘s comments on tapering. While recent ECB meetings have rendered little market reaction, there has been speculation recently that the central bank will begin tapering its bond purchase program at one of its next meetings. While Draghi was optimistic about the outlook for the Eurozone economy, most economists predict the ECB won’t start tapering before the second half of 2017. Quantitative easing is currently scheduled to end in March and with consumer prices still hovering close to zero, policymakers should at least be comfortable with the current level of stimulus or even extend the program before gradually phasing it out once inflation approaches the ECB’s goal of 2 percent.
The ECB will announce its policy decision at 11:45 UTC but no changes are expected. The main focus will be on the press conference 45 minutes later and Draghi’s comments. If he pushes back aggressively against recent talk of tapering, the euro could be vulnerable to further losses. Any signal that the ECB plans to reduce bond purchases will provide a strong boost to the euro. If the central bank however refrains from providing any signals and defers any changes until December, today’s announcement could turn out to be a non-event for euro traders.
To cut it short, let us have a look at the technical chart and prepare for both possible scenarios.
EUR/USD
The euro recently weakened against the U.S. dollar but found some halt around the 1.0950-level, the descending trend line of the euro’s recent downward channel. If the pair breaks below 1.0940 we see a higher likelihood of further losses towards 1.09 and 1.0830. On the upside, the euro would need to break above 1.1060 in order to spark some bullish momentum towards 1.1170.
Apart from the ECB meeting we have U.K. Retail Sales at 8:30 UTC, the Philly Fed index at 12:30 UTC as well as U.S. Existing Home Sales at 14:00 UTC scheduled for release but all these reports could take a backseat to the ECB.
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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 2016 Maimar-FX.
Focus Shifts From U.S. Dollar Rally To Non-U.S. Event Risks
Dear Traders,
We welcome you to a new trading week. While the last week ended with broad based U.S. dollar strength, the greenback could be pushed into the background this week given major event risks such as the European Central Bank meeting on Thursday as well as important economic reports from China and U.K.
Market participants will be closely watching U.K. inflation data on Tuesday. Consumer Price Inflation is forecast to accelerate in September given the fact that sterling’s recent drop boosts inflation. We saw the pound tumbling towards 1.2150 where it found some support for the time being. We anticipate some upward movements towards 1.2225/50 ahead of tomorrow’s report, whereas a break below 1.2130 may boost bearish momentum towards 1.21 and 1.2090.
Euro traders are eagerly awaiting the ECB’s policy decision and the announcement from ECB President Mario Draghi. The market was rocked earlier this month by a report that the central bank could start to taper its bond-buying program of 80 billion euros a month. Draghi could therefore attempt to calm the market by emphasizing that the stimulus would continue. The euro fell below 1.10 and tested the 1.0970-support level on the back of a strong dollar. Whether the EUR/USD could be vulnerable to further losses may hinge on the ECB announcement. If Draghi announces changes to the QE program the euro will react accordingly. For the time being, we consider the 1.0970-50 price area as a support for the pair. On the topside we see a current resistance at 1.1150.
From the U.S. we will have less market moving data this week with the CPI report (Tuesday) being the only interesting piece of economic data. Politically, U.S. presidential candidates Hillary Clinton and Donald Trump will hold their final debate on Wednesday.
Today, Eurozone Consumer Prices are scheduled for release at 9:00 UTC but this report is not expected to have a major impact on the euro. Furthermore, U.S. Industrial Production figures are due at 13:15 UTC.
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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 2016 Maimar-FX.
Amazing Trading Day: Bad For The ECB But Good For Traders
Dear Traders,
What an amazing trading day! While the euro’s rise can be characterized as a bitter pill for the European Central Bank as the market’s reaction was certainly not the sort of movement the ECB may have hoped for, it was a very profitable day for traders. Before getting into the reasons for the euro rally let us look back on a very successful trading day. Short-trader’s efforts paid off after the ECB surprised the market with a drop in the benchmark to zero and we got what we have been looking for: +100 pips. Shortly after reaching our profit target the bearish movement was already exhausted and the euro started its relief rally. As if the profit would have not already been enough, just 90 minutes later our long-entry was triggered and we could watch the euro hitting our higher profit target where we have gained another 100 pips profit. The volatile swings in the EUR/USD allowed even more profit but at some point traders should not be profit-greedy and save the winnings.
The ECB delivered a full stimulus package which can be described as even more aggressive step than everyone has expected. That package included cuts in the deposit and benchmark rates, a pledge to increase the monthly QE purchases to 80 billion euros and four more multi-year lending operations (TLTROs). On top of that, the central bank lowered its GDP and inflation forecasts for 2016 and 2017.
So what was finally the reason for the euro’s later uptrend? ECB President Mario Draghi has made a little faux pas when he told reporters after the meeting that “from today’s perspective, we don’t anticipate it will be necessary to reduce rates further.” In other words there is a limit to monetary easing and the central bank has finished cutting rates further. Draghi’s comments thus considerably outweighed the impact of increased stimulus.
EUR/USD
The euro experienced an upside breakout above 1.1070. Given the high volatility and the shift towards a bullish bias the euro could possibly extend its gains towards 1.1245 and 1.13. While we see a current resistance at around 1.13, the next major resistance zone is only at 1.14-1.15. If the pair breaks above 1.1315 a next target is seen at 1.1370 before heeding towards 1.14. However, the bullish move is not a done deal and traders should also bear in mind that the Federal Reserve is likely to maintain its hawkish policy stance – a fact that could strengthen the U.S. dollar in the medium-term. The former resistance at 1.1070 could now act as a support.
The ECB announcement also triggered volatility in other currencies such as the British pound. The pound participated in the euro’s uptrend and moved finally higher against the greenback. If the pair breaks significantly above 1.4315 we could see sterling rallying towards 1.44. Remaining below 1.43 lower targets could be at 1.4180.
We wish you a wonderful weekend!
Daily Forex signals:
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 2016 Maimar-FX.
We are Maite & Marios Krausse, both born in Germany and trade full time in the Foreign Exchange Market (Forex) as independent traders.
Our teamwork began in 1998, when we got to know and love each other. 20 years later after having built our careers, our son was born, making us a happy family. Continue reading...
