Joined Feb 2014
Status: trading bank levels
EURUSD daily. Same pattern. Next up - dump.
ECB can't reverse anything, therefore a new leg lower is the most likely outcome.
EURUSD only pays swap if you short it. So no incentive for institutional players / funds to hold any long exposure in EURUSD.
Strategically, it's enroute for the gap fill near 0850, can't defy gravity pull.
Announcement of the ECB decision on monetary policy in the Eurozone is what everybody waiting for. Analysts are expecting lowering rates, a new quantitative easing program (an increase in bond buybacks) and all kinds of support signals from the ECB for the European economy.
What are the chances? In our opinion, the chances are high enough. The fact is that the Eurozone economy is sending more and more signals about problems and the upcoming recession. Recall the German GDP growth rate in the second quarter (below zero), negative retail sales in the Eurozone and business activity indices below 50. Everything is decisively in favor of the need for ECB intervention. And although representatives of the Central Bank are supporting fiscal stimulus, it is obvious that the ECB is expected to act.
What does the softening of an already ultra-soft monetary policy mean for the euro? It means that the eurowill be under pressure and it needs to be sold. Against the yen, against the pound and even against the dollar. At least that is what we plan to do today and possibly in the foreseeable future (the final position will depend on the actual decisions of the ECB).
Also, today it is worth paying attention to data on consumer inflation in the United States. Recall that next Wednesday the Fed should decide whether to reduce the rate or not. In this light, inflationary data can either sow doubts or remove them completely. Weak data (low inflation ) will make it clear to the Fed that you can safely reduce the rate. In the end, the central bank’s main goal is to control inflation , and then help to ensure economic growth.
Accordingly, weak data will be another reason for dollar sales in the foreign exchange market. Trump, meanwhile, continues to escalate, urging the Fed to lower rates to 0%. As for other trading ideas, we traditionally recommend buying goldand selling the Russian ruble. Pound purchases also remain a priority.