EUR/USD: ECB decision on rates _02/06/2016

Trading recommendations

Sell ​​Stop 1.1170. Stop-Loss 1.1210. Targets 1.1100, 1.1050, 1.1000, 1.0900, 1.0800

Buy Stop 1.1230. Stop-Loss 1.1170. Targets 1.1255, 1.1285, 1.1300, 1.1400, 1.1485, 1.1500, 1.1600


Technical analysis

On the eve of the event, wearing a strong fundamental nature, do technical analysis is sometimes difficult and useless. When, in December, investors felt the ECB measures and M.Dragi words on expanding QE program in the Eurozone is not enough convincing, EUR / USD pair rose sharply by over 400 points. European stocks sharply gone down against the background of European sales of assets. History may repeat itself because of any careless words M.Dragi said.

For the past month was marked by the strengthening US dollar on the currency market.

The EUR / USD has broken through an important support level 1.1180 (EMA200, EMA144 in the afternoon, EMA50 on the weekly chart), reaching a minimum near the 1.1100 mark.

However, the price returned to the level of 1.1200 today in anticipation of the ECB's decision on interest rates.

The strengthening of the euro also contributed to the growth of cross-pair EUR / GBP on the background of the pound have fallen sharply after the publication of the next poll and betting bookmakers where most of the players puts the UK out of the EU.

If you look at the daily chart of the pair EUR / USD, we see that the indicators OsMA and Stochastic crossed over to the buyers. Break of 1.1255 levels (EMA200 4-hour, EMA50 on the daily chart), 1.1285 (23.6% Fibonacci level of the correction to the last wave decline from highs in 2014), 1.1300 will send the pair to levels of 1.1485, 1.1500, 1.1615 (highs in May and year ), with the prospect of growth to the levels of 1.1700, 1.1785 (38.2% Fibonacci level), 1.1900 (EMA144 on the weekly chart).

Alternative scenario implies a return to the downward trend resumed last month, after the breakdown of support levels 1.1180, 1.1100 (May lows and lower boundary formed a new channel on the daily chart).

 Indicators OsMA and Stochastic on the weekly chart signals fed to the short positions.


Support levels: 1.1180, 1.1100, 1.1050

Resistance levels: 1.1255, 1.1285, 1.1300, 1.1335, 1.1400, 1.1485, 1.1535, 1.1615


Overview and Dynamics

Yesterday, US data released stronger than expected, which boosted investor demand for riskier assets. Manufacturing Purchasing Managers Index (PMI) ISM rose to 51.3, higher than in April, as well as better than expected (50.4). Readings above 50 indicate growth, and strengthen the dollar. ISM index shows growth for the third month in a row.

Also published yesterday "Beige Book" (the economic conditions in the regions of the central bank's report) pointed out that "in most regions experiencing a rise in labor markets." Wages and employment growth are called moderate.

These data support the view that the Fed may raise interest rates in the coming months, in June or July. Earlier, the head of the Federal Reserve Janet Yellen also stated that "the increase in rates is likely to be appropriate in the next few months," depending on the incoming economic data.

 Incoming data give strength to the US dollar. However, today it is necessary to be careful in making trading decisions.

The central event of the day in the financial markets is the ECB's decision on interest rates in the Eurozone (11:45 GMT). According to the majority of market participants, while the ECB will not change policy and will take a wait and see position. It is expected that the European Central Bank will leave the amount of asset purchases at 1.8 trillion euros ($ 2 trillion US dollars) and will keep its key interest rate unchanged at 0%, the deposit rate negative at -0.4%. At a press conference following the meeting (12:30 GMT + 2), ECB President Mario Draghi will probably be to stick to the soft tone of statements and emphasize that the bank will take additional measures if necessary.

This M.Dragi will continue to uphold the policy of extra soft and call your bank to have patience before these policies bring tangible results.

M.Dragi’s words can sharply send EUR / USD pair, both up and down.

In general, if M.Dragi will not make sharp statements, the pair EUR / USD will continue to decline, as the dollar strengthened in the currency market in anticipation of the Fed meeting on 15 June.