Can the 75 bps ECB Rate Hike Turn EUR/USD Bullish?
EUR/USD is heading for the 50 daily SMA and this week's ECB meeting is expected to produce a 75 bps rate hike, but will that be enough to pu
EUR/USD has been bearish since the middle of last year, as it became obvious that consumer inflation was getting out of control in the US and the FED was going to start tightening up the monetary policy, which was extremely loose since the start of the coronavirus. The price fell from above 1.23 to 0.95 lows. The parity was finally broken and it seems like this pair is getting comfortable below that level.
Moving averages have been doing a great job providing resistance at the top and stopping the retraces higher. We have been selling this pair at moving averages on the daily chart, particularly at the 50 SMA (yellow) which has been the ultimate resistance for this pair recently.
EUR/USD Daily Chart – The 50 SMA Keeping EUR/USD Down
The trend is bearish as long as MAs act as resistance
We opened the latest long term signal at the 50 SMA early this month at around 0.98 when the price was trading up there. Now, the price is heading to the 50 daily SMA again after the reversal on Friday, although that was more of a USD move. This week we have the ECB meeting and they are expected to raise interest rates by 0.75% which might send this pair above the 50 SMA and probably above parity, although ING Research doesn’t think so according to their statement, as below.
“While it’s true that the ECB has consistently surprised on the hawkish side in the past few meetings, the positive impact on the euro has been null. As shown in the table below, EUR/USD mostly weakened in the six hours following the last five ECB announcements,” ING notes.
We doubt there will be much support to the euro after the October announcement, even if the ECB attaches a hawkish message to a 75bp rate hike, as: 1) EUR/USD beta to short-term rate differentials has remained low; 2) markets have remained structurally pessimistic on the eurozone’s domestic outlook despite the recent drop in gas prices; and 3) the Fed’s hawkishness continues to fuel a strong dollar,” ING adds.
EUR/USD Live Chart
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Related Articles
Comments
Sidebar rates
Related Posts
Save
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals