What Can We Expect From The ECB Today? – April 27th Morning Brief
Arslan Butt • 3 min read
The market is imperfect and traders are irrational – that's what I learned from the book of Behavioral Finance. This seems particularly true after our forex trading signal on Gold closed at a stop loss level of $1260. In the New York trading session yesterday, the Gold prices plunged for just a few minutes to place a low of $1259.34 and reversed the next second to place a high of $1270.55. On the opposite end, the Nikkei gave us a marvelous trading signal to compensate for our losses in the Gold.
Yesterday, we finally heard something about the much awaited Trump tax reform plan. However, the announcement actually failed to please the market. Steven Mnuchin, the U.S. treasury secretary, sketched out the tax reform plan which revealed nothing new. Let us recall that Donald Trump proposed to cut the corporate tax rate from 35% to 15%. Well, Mnuchin said nothing close to that!
Economic Events To Watch Today
- BOJ Outlook Report (4:14)
- BOJ Policy Rate (4:14)
- Monetary Policy Statement (4:14)
- BOJ Press Conference (7:30)
- Spanish Flash CPI y/y (8:00)
- Spanish Unemployment Rate (8:00)
- Minimum Bid Rate (12:45)
- ECB Press Conference (13:30)
- German Prelim CPI m/m (All Day)
- RBA Gov Lowe Speaks (10:10)
- Core Durable Goods Orders m/m (13:30)
- Unemployment Claims (13:30)
- Durable Goods Orders m/m (13:30)
- Pending Home Sales m/m (15:00)
EUR/USD – Celebrity Of The Day
The single currency is still under the spotlight after the first round of French Election results. However, today, all traders' focus will shift towards the European Central Bank's (ECB) much-awaited monetary policy meeting.
What To Expect From The ECB?
After examining the Eurozone's macroeconomic figures today, I noticed that the labor market, manufacturing, and service sector activity, consumer spending as well as the business confidence numbers improved in the month of April. It's only inflation which missed the mark. Since we know that price stability is one of the main objectives of monetary policy, we can expect ECB's Mario Draghi to share his stance on the rate sentiments.
In my opinion, the ECB will keep the Minimum Bid Rate unchanged, however, I can't say anything about the press conference. But, we can assume it's likely to be dovish, which may weaken the currency.
EURUSD – 4-Hour Chart
Technical Outlook – Intraday
The 26th of April candlestick, in the daily timeframe, demonstrates a great deal of uncertainty between buyers and sellers. Perhaps, investors want to be sure before adding any additional position in the EUR/USD.
The pair's hourly chart defines a narrow trading range of $1.0850 -$1.0950. Breakage above or below will give us an additional signal of the investor sentiment.
Forex Trading Signal
Today, any surprise from the ECB is likely to give us bullish/ bearish breakouts. The bullish breakout (at $1.0950) will lead the market towards the next target level of $1.1000. On the flip side, the bearish breakout (at $1.0850) will give us a selling opportunity with a target of $1.0796.
USD/JPY – The Safe Haven Currency Pair
The demand for haven assets is diminishing day by day due to the lack of uncertainty in the market. Today, the USD/JPY is making a bullish move towards $111.198 as a result of dovish monetary by the Bank of Japan. The Japanese central bank kept their policy rate unchanged at -0.10%.
Besides the rate decision, the BOJ decided to continue purchasing Japanese government bonds by the same volume of ¥80 trillion annually. In doing so, the central bank accommodates the economy by increasing the money supply in the market. The higher supply of money results in a weaker Japanese Yen.
USDJPY – Hourly Chart
Technical Outlook – Intraday
Looking at the 4-hour chart, we can see that the overbought currency pair USD/JPY is facing resistance at $111.700. It's definitely signaling a bearish bias from investors.
Aside from this, a bearish pullback in the pair is followed by a bearish engulfing candle that can also be found on the 4-hour chart. Our leading and lagging indicators are making things even more unclear. For example, the RSI is holding in the buying zone, but the prices are far away from the 50 periods EMA and this divergence in the prices indicates that buyers need a break now.
Forex Trading Signal
At the risk of sounding bearish, the fact is, we can't enter a buy or sell trading signal at the moment as the trend is unclear. Let's wait for the U.S economic events to determine future trends in the market. However, for the sake of an idea, $111.700 seems to be a good level for going short and the $110.500 can give us our buying trade.
Traders, we need to keep patient today as the market can get highly volatile in the wake of high impact economic events from the United States as well as the Eurozone. We will definitely keep you informed about developments in the market so keep following us and good luck today.