Serj Panchuk
Today, on October 2nd, the European Central Bank is going to close its 2-day meeting. At this point most market participants assume that the central bank is going to abstain from new economic stimuli.
Most probably, the ECB will focus on implementing the new asset purchase program, which was a part of the stimulation package approved in September. At the same time, Mario Draghi’s speech will follow the meeting. Market participants are definitely going to focus on it to clarify the near-term policies approved by the central bank since they are definitely going to influence currency markets, including the world’s most popular currency pair – EURUSD.
In particular, the markets will be watching the ECB’s attitude towards low inflation (below the inflation target) as well as bond purchases, to specify the near-term prospects of the common European currency.
Here are several key things investors should pay attention to after the results of the ECB meeting are revealed.
ABS or asset purchase program
ECB’s balance sheet
4-year loans (TLTRO)
Attitude towards Inflation
What about the common currency?
Well, this one has definitely been showing significant weakness since the moment the ECB signaled a new cycle of easy monetary policies in May 2014. On September 30th, EURUSD was trading around 1,26. The downward pressure exerted on the common currency is mainly backed by expectations of another round of asset purchases as a part of quantitative easing while the Fed is moving in the opposite direction by tapering QE3. By the way, the Fed is planning to finish QE3 this month, which definitely give some upward potential to the American currency amid strong economic figures coming from the USA, which is not the case with the Eurozone.
Apparently, the results of the ECB meeting will impact the current state of affairs a great deal depending on the general tone of the results. With that said, the Euro may get either downward pressure or support to see further local highs while regaining value.
EURUSD Prospects As Seen By Masterforex-V Academy
As usual, Masterforex-V Academy, a true expert in financial markets, helps us define the near-term prospects of various assets, including currency pairs. This time, it is all about EURUSD, the major currency pairs out there.
The overall technical picture shows us that the mid-term bias is definitely bearish. The current recovery is caused by profit-taking and reducing exposure in advance of the results of the ECB meeting. The recovery hasn’t been supported by trading volume so far.
Even though the price broke above MAs 21 and 55 (short-term levels of support/resistance) it is still below MA 233, which means the bears are still dominating the market.
If the rally is backed by the ECB’s positive tone, we may see a further move up to 1,2764 and above if the price overcomes the 1,2673-1,2715 area. Alternatively, a move below 1,2570 may give way to 1,2506.
According to the Binary Options Department of Masterforex-V Academy, it is recommended to go short by purchasing put options on EURUSD each time the price recovers high enough to do that. The estimated average lifetime of the option is 1,5 hours or so.
Serj Panchuk
