EUR/USD Technicals – Assessing the ECB Aftermath

EUR/USD Technicals – Assessing the ECB Aftermath

Time Table

EUR / USD tanked following the fall of the ECB's surprise rate. The central bank reduced the benchmark interest at a record high of 0.25%, while the refinancing rate of the bank was also similarly cut to 0.75%. Not only that, the president Draghi has also hinted that more rate cuts may be possible in the future, saying that policy makers could further reduce rates "in principle", as the ECB had "a range of instruments to activate before reaching the lower limit. "

therefore, even if the rate cut was surprising, the decline resulting 0 pips was not. What is more interesting is the strong pullback that followed, where prices have retraced all but 50 pips losses during the US session. generally, post pullbacks events are common, but in this case the retracement was significantly much higher being Because the new event proved to be a huge downside surprise. Swap Index price has a 4% risk that the ECB will reduce rates this time, so in theory we should have at least seen a huge price revaluation that was sustainable.

the magnitude of the decline yesterday we said that this new "equilibrium" following new rate outlook is only about 100 pips, very little since the expected rate cuts ECB in the recent past have resulted in pushing harder bearish. Therefore, it seems reasonable to think that there are significant buyers of EUR / USD which consider lower ECB rates and future rate cuts as a worthy deterrent.

What could it then?

a reason could be the speculators preemption of a lower than expected nonfarm payroll today, speculators believe that fuel the case for the prosecution or perhaps luck out additional quantitative easing . Ironically, with the ECB surprising the market with a movement of easing speculation for the Fed to pull a dove out of his hat becomes even greater. This leads to the weakening USD and contributed pulled EUR / USD yesterday.

However, contrary to the ECB's event, which was unexpected, a weaker than expected NFP (below analysts consensus estimate of 125K to be exact) scenario could already fully in prices. therefore bullish response can be cut later today, and the risk of a downward surprise for EUR / USD is higher. In addition, the downward trend of the EUR / USD remains in play, even if the EUR / USD rally following a dismal NFP print, failure to break 1.3525 to 1.355 resistance band can cause strong downward reaction because it can be interpreted as a confirmation overall bearish bias.

moral of the story?

bearish EUR / USD remains, and speculators who hope to see weaker USD and thus higher EUR / USD can lose. 2 wrongs do not make a right, and even a weak USD coupled with a weaker EUR should not inspire a long-term bullish outlook for EUR / USD

Links :.

GBP / USD - resistance remains around 1.61
AUD / USD - Continues to Drift below 0.95
EUR / USD - drops sharply but rebounded off support at 1.33

This article is only for general information purposes . It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or its subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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