Getting ready to ECB meeting
On Thursday April 21 at 13:45 СЕТ the following ECB meeting is scheduled. Investors expect no immediate interest rate cuts while assume the further monetary easing is probable. Will the euro edge lower?
Since the start of the year the euro has strengthened around 4% against the US dollar which may have happened on economic data. The Eurozone GDP growth was 1.6% in Q4, above the same indicator in US (+1.4%). Meanwhile, the European trade balance is continuously positive which is far above the constant negative trade balance in US. Nevertheless, the risks of further interest rate cuts by ECB may offset positive economic news and push the euro lower. The 5-year government bonds yield is negative at 0.36% while the yield on the same-term US bonds is 1.23%. Meanwhile, the US government left room open for further interest rate hikes while ECB, on the contrary, is going to cut them. The current overnight rate is 0.37% in US and -0.34% in EU. We believe, the higher risks of rates divergence may weaken the euro.
EURUSD
On the daily chart EURUSD: D1 is struggling for getting back in the rising channel after the recent break through its support line. The MACD and Parabolic indicators give bearish signals. The RSI has left the overbought zone and formed the negative divergence. It is above 50 now. The Bollinger bands have widened which means higher volatility and are tilted downwards. The bearish momentum may develop in case the euro falls below the last fractal low at 1.123. This level may serve the point of entry. The initial risk-limit may be placed above the last fractal high at 1.147. Having opened the pending order we shall move the stop to the next fractal high following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 1.12 without reaching the order at 1.147, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
Position Sell
Sell stop below 1.123
Stop loss above 1.147
This overview has an informative character and is not financial advice or a recommendation. IFCMarkets. Corp. under any circumstances is not liable for any action taken by someone else after reading this article.
Recommended Content
Editors’ Picks
EUR/USD stays near 1.0750 following Monday's indecisive action
EUR/USD continues to fluctuate in a tight channel at around 1.0750 after posting small gains on Monday. Disappointing Factory Orders data from Germany limits the Euro's gains as investors keep a close eye on comments from central bankers.
GBP/USD retreats below 1.2550 as USD recovers
GBP/USD stays under modest bearish pressure and trades below 1.2550 in the European session on Tuesday. The cautious market stance helps the USD hold its ground and doesn't allow the pair to regain its traction. The Bank of England will announce policy decisions on Thursday.
Gold price turns red below $2,320 amid renewed US dollar demand
Gold trades in negative territory below $2,320 as the souring mood allows the USD to find demand on Tuesday. Nevertheless, the benchmark 10-year US Treasury bond yield stays below 4.5% and helps XAU/USD limit its losses.
Ripple lawsuit develops with SEC reply under seal, XRP holders await public redacted versions
Ripple lawsuit’s latest development is Securities and Exchange Commission (SEC) filing, under seal. The regulator has filed its reply brief and supporting exhibits and the documents will be made public on Wednesday, May 8.
The impact of economic indicators and global dynamics on the US Dollar
Recent labor market data suggest a cooling economy. The disappointing job creation and rising unemployment hint at a slackening demand for labor, which, coupled with subdued wage growth, could signal a slower economic trajectory.