Currency market: EUR/USD and ECB
|The ECB's Euribor for the 3 month rate traded positive 0.002 last Thursday. The ECB's new overnight rate termed STIR trades -0.583 or positive 0.41. Why EUR/USD traded so low for so long is found at 0.41 as EUR/USD price was maintained low by the ECB on purpose.
At 0.41 competes with the Fed at 1.58 or a difference of 1.17. If the ECB raises 25 points then 0.41 goes to 0.65 and a 52 point difference between the ECB and Fed. The question will the ECB move rates today is answered by I don't know and for trades and profit purposes, it doesn't matter to a moot point.
The ECB is an activist central bank and works on its own interests, its own accord, its own volition. The ECB acts in regards to its own interests rather than join the crowds of central banks.
The ECB went negative in 2014. In 2016, the ECB rearranged world interest rates. The ECB changed the FIX price in 2016 and this reorganized the character of traded markets. Not only was the FIX price time changed but the statistical structure of the FIX was entirely re organized.
In the 1920's, the ECB struck deals with the FED to import Inflation. The ECB's activism over the past 100 years has nothing on the BOJ's failed economic programs over 100 years.
If the ECB decides to raise then what we know is a tighter market will trade and much of the latest volatility seen over past months will subside. Yet if the ECB remains at 0.41 then the message is EUR/USD will remain lower for longer. The market and averages will decide EUR fate.
The ECB's main reorganization surrounds the concept to limit movements at news announcements. In this regard, the ECB was most successful as they placed a stranglehold on interest rates at the time of major GDP and Inflation announcements. Suppress interest rates then forces no movements to the currency price.
Yesterday's markets were dead as a result to no interest rate changes from Tuesday to Wednesday. No interest rate movements then no market price movements to all financial instruments.
Central bank meetings are incorporated to include a major news announcement and explains the 50 pip moves to interest rate changes.
Most traders use a market price to trade. Most market prices are wrong therefore a market price must transform to an understandable, correct and trade able price.
EUR/USD's wider range is located from 1.0304 to 1.0146. Current EUR/USD is overbought.
Bottom side EUR: 1.0163 1.0176, 1.0182, 1.0189 1.0186 and 1.0189. EUR/USD is well supported at the 1.0180's but also note how tight is this market.
Topside EUR/USD: 1.0221, 1.0228, 1.0234, 1.0241, 1.0254, 1.0260, 1.0267.
Both top and bottom EUR trades extremely tight and contains no room to move. This was concocted by the ECB in collusion with the FED.
If EUR/USD decides to trade to non normal levels then the top looks like this: 1.0276, 1.0285, 1.0294, 1.0304.
If the bottom trades non normal then levels look like this: 1.0146, 1.0157, 1.0139, 1.0121, 1.0103.
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