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What to expect from ECB and how to trade EUR Today
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Loading..."We never commit in advance" - This was the rule that ECB broke last week after the chief economist of the bank, Peter Praet, said he would begin discussing the gradual ending of the QE program.
What has actually changed?
Oil growth in recent months has led to higher inflation in the Eurozone and tensions in Italy have fallen. What remains to the ECB as the main risk is trade between the US and the EU.
What to expect?
According to a large number of market participants, QE will end by the end of 2018. or in the first quarter of 2019. But why does EUR not record the strong growth most traders expect? The reason for the euro growth in the face of these cardinal changes in the ECB is that the bank may stop QE, but it will certainly remain highly adaptable. This means we will get the so-known comment from Mario Draghi - "We reserve the right to increase purchases or the QE term if necessary".
On Thursday, we expect the ECB meeting where I do not think we will observe interest rate changes. The important thing for all EUR traders and investors is what will be the comments of the press conference afterwards. It is then that I expect a strong volatility in the EUR, and if the ECB confirms its plans to end QE, a strong but short-term growth of the combined currency. In any case, the volatility will be very high, and this will even give rise to scalp trade.
In the medium term, I expect EUR/USD to come out of the consolidation that has been formed in recent days. If the ECB reaffirms its intentions, it will undoubtedly raise the price in the upward direction, and then the test of the main resistance zone seems to be the most appropriate level where the price will stop. The zone is formed by 200 periodic average, 50% Fibonacci correction of the last downward wave and short and long horizon.
Trader Petar Milanov Read more:
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