ECB Preview: EUR/USD Rally to Unravel on Wait-and-See Approach

European Central Bank (ECB) to Preserve Zero-Interest Rate Policy (ZIRP).

Will a Governing Council Start to Taper a Asset-Purchase Program?

Join DailyFX Currency Analyst Christopher Vecchio LIVE to Cover a ECB Meeting.

Trading a News: European Central Bank (ECB) Interest Rate Decision

ECB Interest Rate Decision

The European Central Bank (ECB) seductiveness rate preference might primarily trigger a bearish greeting in EUR/USD as President Mario Draghi and Co. are widely approaching to keep a rarely accommodative process stance.

Why Is This Event Important:

With a ECB in no rush to mislay a zero-interest rate process (ZIRP), marketplace participants are approaching to compensate increasing courtesy to a forward-guidance as a quantitative easing (QE) module is set to end in December, and a Euro stands during risk of giving behind a allege from progressing this month should a executive bank uncover a larger eagerness to lift a non-standard magnitude into 2018.

Nevertheless, a some-more bullish unfolding might reveal should a Governing Council adopt a hawkish tinge and demeanour to interpretation a easing-cycle over a entrance months. The ECB might start to finish a asset-purchase module as officials note a ‘very inauspicious scenarios for a acceleration opinion had turn reduction likely, in sold as deflation risks had largely vanished,’ and a serve change in a financial process opinion might fuel a adjustment in EUR/USD behavior generally as a span fast approaches a 2016-high (1.1616).

Impact that the ECB rate preference has had on EUR/USD during a prior meeting

June 2017 European Central Bank (ECB) Interest Rate Decision

EUR/USD 5-Minute

EUR/USD Chart

DailyFX 3Q Forecasts Are Now Available

Even nonetheless a euro-area is now ‘projected to enhance during a rather faster gait than formerly expected,’ a European Central Bank (ECB) stranded to a sidelines in June, with officials mostly endorsing a wait-and-see proceed as ‘measures of underlying acceleration sojourn low and have nonetheless to uncover convincing signs of a pick-up.’ At a same time, a Governing Council appears to have put a building on seductiveness rates as ECB officials now ‘expect them to sojourn during their benefaction levels for an extended duration of time,’ and President Mario Draghi and Co. might continue to gradually change their balance over a entrance months as ‘the risks surrounding a euro area enlargement opinion are deliberate to be broadly balanced.’ Nevertheless, a Euro struggled to reason a belligerent following a uninformed developments, with EUR/USD shutting a day during 1.1212.

How To Trade This Event Risk(Video)

Bearish EUR Trade: ECB Sticks to Current Script, Attempts to Buy More Time

  • Need a red, five-minute candle following a press discussion to cruise a brief EUR/USD position.
  • If marketplace greeting favors a bearish Euro position, sell EUR/USD with dual apart lots.
  • Set stop during a near-by pitch high/reasonable stretch from entry; demeanour for during slightest 1:1 risk-to-reward.
  • Move stop to breakeven on remaining position once initial aim is met, set reasonable limit.

Bullish EUR Trade: Governing Council Unveils Detailed Exit Strategy

  • Need a green, five-minute EUR/USD candle to preference a prolonged Euro position.
  • Carry out a same setup as a bearish Euro setup, only in a conflicting direction.

Potential Price Targets For The Release

EUR/USD Daily

EUR/USD Daily Chart

Chart – Created Using Trading View

  • EUR/USD carves a bearish inside-day (harami) as it pulls behind from a uninformed 2017-high (1.1583), with a Relative Strength Index (RSI) display signs of depletion as a movement indicator deviates with cost and struggles to pull into overbought territory.
  • Failure to tighten above a 1.1580 (100% expansion) jump might beget a near-term pullback in EUR/USD, with a pierce subsequent 1.1480 (78.6% expansion) opening adult a 1.1400 (61.8% expansion) handle, followed by a Fibonacci overlie around 1.1330 (23.6% expansion) to 1.1350 (50% expansion).
  • Nevertheless, a broader opinion stays constructive amid a element change in marketplace behavior, with a mangle of a 2016-high (1.1616) opening adult a subsequent topside jump around 1.1670 (78.6% expansion).
  • Interim Resistance: 1.1616 (2016-high) to 1.1670 (78.6% expansion)
  • Interim Support: 1.0980 (50% retracement) to 1.1020 (50% expansion)

— Written by David Song, Currency Analyst

To hit David, e-mail dsong@dailyfx.com. Follow me on Twitter during @DavidJSong.

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