What tomorrow`s ECB rate decision means for the EURO

What tomorrow`s ECB rate decision means for the EURO

By: James Ansher | Where To Trade | On:1-10-2014 11:29
Back

Key Highlights

  • Expectations for the EUR to remain bearish
  • A context of tomorrow’s Rate decisions
  • Analysis of ECB major Concerns for the Eurozone
  • What to expect Tommorrow

Expectations for a EURUSD correction are mounting as the pair falls to fresh lows each day. The pair, at 1.26 levels is at its lowest of the proceeding five quarters. A bullish dollar and softer economic data has seen the bears dominate this pair for the whole of the third quarter of 2014. There has not been any major retracement for the pair since July.

On a long term horizon the fundamental outlook is expected to continue for the next three quarters, the ECB cut overnight rated by 25 basis points at the beginning of September and remains dovish while speculations of a rate hike in the US by the FEB are mounting. Longer term traders that short the EURUSD are expecting to see the pair to fall below its present levels beyond the 1.25 level.

In the medium term however, we may see some whipsaw moves occasioned by profit taking near the major levels and short term speculation. Because of the fears and expectation that the pair is ripe for a major correction, any inconsistent fundamental news may cause a major counter trend move. For this reason short term and medium term traders that are short the EURUSD with tight stops may get whipsawed into loses.

Top on the ECB’s list of concerns

At 12:30 UCT tomorrow, Mario Draghi is expected to give a conference tomorrow following the ECB interest rate decision at 11:45. Markets have proved to get excited with high volatility during such conferences and as we are on the lookout for any indication of a change in policy.

Top on the agenda for the ECB will be

  • The recent soft inflation data coming out of the Eurozone,

On Tuesday the European Union HICP showed that inflation in the Eurozone dropped to 0.7% a two year low. This is far below the ECB’s target of 2% annual inflation. It will be interesting to see how the ECB now assesses the situation. Lower inflation below the 2% targets implies sub-par economic activity which will exert a bearish pressure in the Euro exchange across the board.

  • Weak credit outlook for the region
    The Eurozone has had credit strains where there has been very low credit demand from the private sector. This is primarily because of the down turn in economic activity. A weak demand for credit makes it harder for a sovereign bank to resuscitate a weakening economy through conventional monetary policy tools.  This low credit demand comes in light of a banking system transition and deleveraging efforts in the whole European baking system.
  • The effectiveness of its targeted longer-term refinancing operations (TLTROs) it introduced in June.

Where To Trade - EuroZone HICP

In June the ECB introduced the TLTRO targeted at sustaining the economic activity in the Eurozone area. The TLTRO are low interest loans to help stimulate the private sector. Though not controversial the exact impact and uptake to this program is hard to anticipate fully, we hope to get Draghi’s views on how the TLTRO will be absorbed in the economy.  

Wrap up

The ECB has shown commitment to stimulate economic growth in the EU and fight off disinflation. However as we have seen, the measures taken by the ECB are quite recent and together with other factors outside the Eurozone, they have been responsible for the weakening Euro exchange rates.

Tomorrow we anticipate the ECB interest rate decision to remain unchanged and Draghi to echo that the ECB is monitoring the situation.  The Period during the speech is likely to have a higher volatility spike so it may be an unwise choice to be into short term trades. If these expectations are fulfilled we anticipate the EUR to resume its bearish moves.

James Ansher

James Ansher

When there is a will there is a trade

A successful Forex trader and expert advisor

EURUSD Slow and Steady Uptrend

EURUSD Slow and Steady Uptrend

By: Ben Myers | Where To Trade | On:02-05-2015 11:21

Euro traded higher versus the US Dollar Intraday, and registered a new weekly high as buyers were optimistic after a report which points that better growth is possible in the Euro Area.

Euro Above 1.1200 And Looks Set For More Gains

Euro Above 1.1200 And Looks Set For More Gains

By: Simon Furman | Where To Trade | On:30-04-2015 11:11

Euro continued to gain momentum against the US dollar as the latter one weakened recently, which means there is more room for gains in the EURUSD pair.

EURUSD Moved Above 1.1000, Eyes a Test of 1.1040

EURUSD Moved Above 1.1000, Eyes a Test of 1.1040

By: Oliver Miller | Where To Trade | On:29-04-2015 11:06

UK Nationwide Housing Prices highlighting the value of the houses prices in UK and indicate current movements in the housing market posted an increase of 1% in April, compared to the preceding month.

EURUSD Looks Set To Break 1.0920

EURUSD Looks Set To Break 1.0920

By: Darryl Frankfort | Where To Trade | On:28-04-2015 10:53

Euro managed to gain bids during the London session against the US dollar, and it looks like the pair might break the recent high of 1.0920 to trade close to the 1.0950 level.

FX Market Continues To Consolidate Post Dollar Losses

FX Market Continues To Consolidate Post Dollar Losses

By: James Ansher | Where To Trade | On:27-04-2015 10:46

US dollar continued to weaken against a few currencies and managed to recover some ground against currencies like the Euro and the British Pound

StockPair

Press Release

YesOption Voted Best Technical Analysis by DailyForex

YesOption Voted Best Technical Analysis by DailyForex

August 12, 2014 - London, UK, - Leading online forex and binary options trading platform - www.yesoption.com has once again made the news by being awarded the prestigious award of ‘Best Technical Analysis of 2014’ ...
24option binary options broker review

24option binary options broker review

Plus500Findings.com is recently launched online to help traders decide which broker they could open an account. 24Option, one of the popular trading platform online is reviewed whether it is legitimate broker or scam. This reviews and findings are of great benefits for traders, especially for those novice ones, who are just starting in the trading industry. ...
Banc De Binary Expands Investment Research Service

Banc De Binary Expands Investment Research Service

Leading Investment Firm, Banc De Binary, which specializes in binary options trading, has added a new weekly video series and trading webinars to the investment research service that it provides to its clients. ...

Articles

Citigroup Inc. is to pay $25 million amends

Citigroup Inc. is to pay $25 million amends

Citigroup accepted to pay the amends without denying the accusation ...
Netflix added 7.1 million new subscribers

Netflix added 7.1 million new subscribers

Netflix Inc. managed to add in the last quarter of 2016 more subscribers than expected ...
The Federal Reserve Chair Janet Yellen is set to have another speech on Thursday

The Federal Reserve Chair Janet Yellen is set to have another speech on Thursday

On Wednesday, Federal Reserve Chair Janet Yellen spoke about the interest rates and about the United States' economy ...
StockPair

Featured Listings