Forex Signals Brief for September 7th: Can the ECB put a Rocket Under the Euro?
Rowan Crosby • 3 min read
It’s time to get excited FX traders!
Thursday marks another installment of our big week for Central Bankers with all eyes firmly focused on Mario Draghi and the ECB.
It’s been a busy 24 hours for FX followers, yesterday we saw what happens when we get some big currency news. As I wrote in Wednesday’s morning brief, the BoC raised rates by 0.25% and the CAD went on a charge higher. We’ve also had the continued fallout from North Korea, more hurricanes hitting US shores and a member of the US Federal Reserve stepping down.
Nevertheless, today I’m interested in what Mario Draghi has to say from himself and how we can try and find some great trades in the Euro.
Top Economic Events Today
EUR – GDP
Eurozone GDP is out today at 9:00 GMT. Analysts are predicting both the yearly and monthly data to come in the same as the prior period. Normally this would be a market mover, but against the backdrop of an ECB day, I don’t think it will be.
EUR – ECB Interest Rate Decision
The official interest rate decision will be released at 11:45 GMT and predictions are for the cash rate to be kept on hold.
EUR – ECB Press Conference
The ECB Press Conference will get underway at 12:30 GMT. Look for any further insights into the thinking behind the decisions of the ECB and talk on QE.
EUR/USD – Look for Changes in QE
For the most part, few are predicting any changes in interest rates. However, that doesn’t mean this can’t be an exciting event. Much of the focus is on the QE program and what changes might be going forward.
Last week a report from Bloomberg came out suggesting that the ECB won’t be rushing into a decision on QE before October. Since that story came out the Euro has still been holding strong.
There is a case for a reduction in QE and there is every chance that it might occur today so we need to be prepared for that eventuality.
EUR/USD – 240 min Chart
EUR/USD – Trading Plan
What we’re looking for is if the ECB is intending to taper the QE program. QE began in a bid to stimulate the economy and now it appears that things are starting to turn around, the question being asked is when they might wind it up.
There are a few scenarios:
No talk of a taper or postponement: Expect a selloff and we’ll be targeting a move towards 1.1825-1.1800.
Cut Asset Purchases by 20B Euro: We will get a spike towards 1.2000.
Cut Asset Purchases by 30B Euro: We will get a spike towards the highs at 1.207-1.2010 and beyond.
These are the ranges that I would use as profit targets or support and resistance levels. If there is talk of postponement and we sell down to 1.1800 or below, that provides an enticing level to buy. If there is to be a reduction in QE going forward -certainly if it's hinted that it might be in October.
Of course, we can’t predict the outcome of any meeting of a Central Bank. A large component of their power comes from the element of surprise. However, we can prepare and be ready for different scenarios.
It could be a very exciting day for Euro traders. Good luck out there and let’s make some great trades!