The EURUSD continues to consolidate within the tight range. Despite weak dollar overnight, the single currency unable to pick up the pace, down for a fourth consecutive session on Wednesday.
The OECD warns that the global economy is slowing, and major risks persist, with growth weakening much more than expected in Europe. In the latest Interim Economic Outlook, the OECD projects that the global economy will grow by 3.3 percent in 2019 and 3.4 percent in 2020.
Downward revisions from the previous Economic Outlook in November 2018 are particularly significant for the euro area, notably Germany and Italy, as well as for the United Kingdom, Canada, and Turkey, says the latest OECD Interim Economic outlook.
Read the full report: http://www.oecd.org/newsroom/oecd-sees-global-growth-slowing-as-europe-weakens-and-risks-persist.htm
“The global economy is facing increasingly serious headwinds,” said OECD Chief Economist Laurence Boone. “A sharper slowdown in any of the major regions could derail activity worldwide, especially if it spills over to financial markets. Governments should intensify multilateral dialogue to limit risks and coordinate policy actions to avoid a further downturn,” Ms. Boone said.
Today focus remains on the ECB monetary policy meeting followed by Draghi’s Press Conference.
ECB Preview: With eurozone growth is slowing, at today’s meeting, the ECB set the stage to downgrade.
It’s unlikely that the interest rate will move so all eyes on the Draghi’s communication during the press conference. As we noted earlier, there is a chance of a significant downgrade to growth and inflation. Moreover, economists expect debate on TLRO (Targeted Long-term Refinancing Operation) which is going to expire in June 2020.
“The central bank will likely focus on replacing the long-term refinancing operations. Downgrades to the macro path should provide the backdrop for an announcement of extra bank funding, either at the upcoming March meeting or in April” Said analyst team at Morgan Stanley in a note.
Moody’s analytics team forecast that the central bank will be revised down the GDP to 1.3% in 2019 and 1.6% in 2020, respectively.
“We are penciling in that the bank’s GDP and inflation forecasts for 2019 will be revised down; core inflation has hovered around 1% for a long time, which means that the ECB’s expectation that it will average 1.4% in 2019 looks fanciful” Moody’s Analytics reported.
Ahead of today’s ECB meeting, we are going to trade between 1.1270-1.1325. The weak daily volatility and the bearish turnaround of the daily RVI should cap the rallies in the coming days. Against this backdrop, a lasting break of the 1.1440 sounds tricky, and we rather fear a decline to supports at 1.1270, 1.1250 and 1.1200.
Note that a break below 1.1200 would underpin strong bearish momentum, paving the way for a decline to 1.1150 before 1.1000.
Read: EURGBP forecast
The price action has been trading in a tight range of 1.1220-1.1570 for last four-months (November 2018-February 2019), The consolidation last extended to the same-months on December 2016-March 2017 followed by a big break higher. This time we are not expecting a big break higher unless the rate differential supports.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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