Major Things to Know In U.S. Session, Brace for ECB Rate Decision
|On Thursday, global financial markets are trading sideways ahead of the most awaited ECB policy decision. Investors are currently pricing in dovish ECB monetary policy meeting. It's due at 11:45 GMT later today.
In addition to this, traders are also expecting a third rate cut for December from the Federal Reserve. The odds of U.S. Fed rate cut are pretty high as the U.S .President Donald Trump continues to place pressure on the Fed Chairperson Jerome Powel to keep the rates lower.
ECB Rate Decision & What to Expect from Mario Draghi
Today, the ECB rate decision is due at 11:45 GMT along with with the press conference at 12:30 GMT. The European Central Bank is expected to inject a significant bailout monetary stimulus plan. The Frankfurt-based organization has previously indicated at this in its earlier meeting in July.
An emerging recession in German, moderating global demand, and falling inflation have all started the bank to pre-announce motility. A rate reduction of 10 base points from the prevailing deposit rate of -0.40% has already priced in the market.
As of writing this update, the ECB has already released the ECB minimum bid rate. European Central Bank (ECB) published a huge new bond-buying program Thursday in a bid to spur the weak eurozone economy. President Mario Draghi declared that the central bank would leave its main deposit rate by 10 basis points to -0.5%, in line with expectations.
President Mario Draghi and his dovish associates may shift for a wider cut, probably 20base points or resumption of the bond-buying scheme (QE). Let's wait for press conference.
EUR/USD - Bears Looms Ahead of ECB Rate Cut
During the European session, the EUR/USD continues to clip some losses ahead of ECB policy decision. Most of the investors are trying to save their funds from capturing any sharp movement on the release of the ECB meeting and rate decision.
Now the question is, what are the expectations from the ECB?
Most of the market, economics, and analysts are expecting the European Central Bank to loosen monetary policy during the U.S. session open.
Let's discuss three things that ECB can do to boost its economic growth.
Interest Rate Cut
Most of the traders have previously priced in 10 base rate cut, which is why we have seen a sharp sell-off throughout the week. Since the ten base point rate change is already priced in, investors will be happy to see 20 base points rate cut today.
Quantitative Easing (QE) Program
The second option is likely to be the quantitative easing program. Various banks are expecting ECB to inject around 30 billion euros per month over the next year. Well, this option is also likely to weaken the Euro.
Forward guidance
Third and foremost is forward guidance. In case we experience no changes in the rates from ECB, then focus will shift to press conference. Mario Draghi may remove the sentiments of keeping interest rates lower until 2020. Even this statement is likely to drive bullish bias for the EUR/USD today. So brace for a big trade.
EUR/USD - Daily Technical Analysis
As we discussed in our previous update, the EUR/USD was trading in a tight range of 1.1020 and 1.1060 for a week, but the range got violated, and EUR/USD slipped lower to trade at 1.1000 area.
For now, the pair is still holding in the selling zone, below 50 areas on the RSI and MACD and it may find an immediate resistance at 1.1065 along with support around 1.1000. While the bearish breakout of 1.1000 can lead EUR/USD further lower towards 1.0965/
EUR/USD - Daily Technical Levels
Support Resistance
1.1012 1.1049
1.0997 1.1072
1.096 1.111
Pivot Point 1.1035
EUR/USD - Daily Trade Sentiment
Although trading in the EUR/USD mostly depends upon the ECB, investors may stay bearish below 1.1035 as the market is very much likely to go towards 1.0997 and 1.096.
Gold - XAU/USD - Double Bottom Pushes It Higher
On Thursday, the precious metal gold trades bullish at 1505 level after hitting the double bottom support area of around 1,494. The market is now facing a lack of liquidity, and trading volume as investors are hesitating to take further positions ahead of ECB rate decision, which is due shortly.
Besides that, the ease in U.S. -China trade relations is also keeping the safe-haven demand for gold faded. Investors will also have an opportunity to respond to the announcement of the U.S. consumer inflation news at 12:30 GMT tomorrow. U.S. CPI has a probability of setting the tone for later U.S. Federal Reserve action.
Gold - XAU/USD - Daily Technical Analysis
Technically, gold has bounced off after testing the strong double bottom support level of around 1,484. It has formed a bullish engulfing pattern on the 4-hour timeframe, which is suggesting bullish bias among traders.
On the side of the indicator, MACD rate is displaying a bullish crossover, proposing an excellent probability of a bullish reversal. Nevertheless, the bullish trend may find resistance at 1,511 and 1,520 today.
The 50 period EMA is also likely to extend resistance at 1,511. Well, considering the bullish power of candles, the market is pretty much possible to violate 50 periods EMA to continue the bullish trend until 1,519.
Gold - XAU/USD - Daily Technical Levels
Support Resistance
1479.77 1496.33
1473.87 1507
1457.31 1523.57
Pivot Point 1490.44
Gold - XAU/USD -Daily Trade Sentiment
I will be looking for bullish trades above 1,505 and bearish trades below the same. Bullish target is likely to be 1,511 and 1,517 for today.
All the best for the U.S. session!
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