The first trading day this week was started on a crazy note. The Oil intraday gains racked Oil-related currencies following the drone attack on Saudi oil fields. On a safe-haven note, Gold, Silver, and Yen surge overnight with Treasuries whereas the Monday’s Oil rally did not much affect the euro.
The common currency halted a four-week falling streak in early September, since then it is consolidating in a thing range between 1.0925-1.1100 levels. Even last week’s ECB meeting has failed to change the common currency’s landscape.
Small than expected depo cut was disappointed, but open-ended QE has been the hope for lower euro. At the press conference, Draghi has emphasized the importance of the fiscal stimulus.
“ECB President Mario Draghi also emphasized on the importance of fiscal stimulus and structural reforms, essentially saying that only a combination of both monetary and fiscal stimulus could revive European growth.” CNBC reported.
- Deposit rate: Decreased by 10 basis points to -0.50%
- QE: €20 billion as from 1 November
- TLRO 111: The maturity of the operations will be extended from 2 to 3 years.
“ECB’s Governing Council announced that it would maintain its accommodative monetary policy stance given slowing economic conditions in Europe, persistent downside risks of global trade tensions and muted inflationary pressures. As a result, the ECB relaunched its Asset Purchase Programme and lowered the rate on the deposit facility by 10 basis points to negative 0.50% from negative 0.40%.” Moody’s Analytics said in a note.
Market reaction: Euro surges
Based on the daily chart pattern, we have found that the EUR has made a double bottom pattern against AUD, MXN, and USD. And we have updated the same in our twitter handle, just after ECB press release hit the wires.
Looking ahead, traders are focusing on the Fed meeting this week. The two-day FOMC meeting concludes (September 17-18), commentary on growth and rate outlook would be a key factor to watch out for. The policy statement and fresh Summary of Economic Projections will be released (2pmET) followed by Chair Powell’s press conference (2:30pmET). Financial markets are fully priced in for 25bps rate cut.
Ahead of the meeting, USD long remained, but the sentiment is less bullish.
“In the week leading to September 10, CFTC non-commercial accounts were small USD sellers. The USD selling was broad-based against all currencies except GBP and EUR. The largest USD selling was seen against JPY and CAD. These accounts continued covering their CHF shorts to the smallest since September 2017, turning almost flat positioned.” Morgan Stanley FX positioning tracker reported.
Asides from the Fed meeting, German ZEW economic sentiment is worth to watch today.
On the technical front, EURUSD formed a double bottom pattern on the daily chart last week.
The common currency halted a four-week falling streak in early September, since then it is consolidating in a thing range between 1.0925-1.1100 levels. Even last week’s ECB meeting has failed to change the common currency’s landscape. We expect the Fed’s policy could change the gameplay.
Last week EURSUD managed to hold the psychological significant level of 1.0925. The price managed to rally over 150 pips to post the press conference, later give up half of the gains.
Technically, EURSUD should close below 1.0925 to retrace further, till then it would remain range-bound between 1.0925-1.1100. Below 1.0925 the pair would gradually fall to the wave C to 1.0860 levels.
Intraday: According to the pivot charts, key support level is placed at 1.1000, followed by 1.0980. If the index starts moving up, key resistance levels to watch out for are 1.1020 and 1.1080/1.1100 levels.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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