ECB Meeting Offers Little New Information

The ECB released its interest rate decision and left key interest rates unchanged


The European Central Bank released its interest rate decision today and left key interest rates unchanged at 0%, as well as, maintaining -0.5% on the deposit facility rate.  In the accompanying  statement, the Bank announced the start of the “ECB Strategic Review of Monetary Policy”.  Although not giving many specifics,  Christine Lagarde later mentioned it will take most of this year to complete.  In addition, the statement said that the Committee “sees rates at present or lower levels until the inflation outlook robustly converges to target.”  

On the bright side, in the press conference which followed, Lagarde said “underlying inflation, while low, has stabilized, or upticked slightly” while adding that “over the medium-term, inflation is expected to increase.”  She also mentioned that “governments with fiscal space should be prepared to react in a timely manner”.

Although the EUR/USD initially spiked from 1.1090 to 1.1110, the move was immediately faded, and the pair was sold down to near 1.1050. 

Source:  Tradingview, City Index

The pair has been in a long-term falling wedge since mid-2018 and appeared to be breaking higher near the end of December 2019.  However, the  EUR/USD hit the 61.8% Fibonacci retracement level from the June 25, 2019 highs to the October 1st lows near 1.1210, the pair reversed.

Source:  Tradingview, City Index

EUR/USD formed a Head and Shoulders formation on the 240-minute timeframe and broke the neckline as it traded back into the falling wedge(on the daily). The target for a head and shoulders pattern is the distance from the head to the neckline added to the breakdown of the neckline area. In addition, which in this case is near 1.0935.  On this move lower, price also broke through the 50% retracement level from the lows of October 1st, 2019 to the highs on December 31st.  Horizontal support and the 61.8% Fibonacci retracement level of the previously mentioned timeframe could stall the move lower between 1.1015 and 1.1030.

Source:  Tradingview, City Index

Note that EUR/USD isn’t the only Euro pair moving lower today.  EUR/JPY is testing the bottom trendline of a rising wedge on the daily timeframe, down over 100 pips on the day so far near 120.80.

Source:  Tradingview, City Index

The move lower in Euro pairs today may be attributed to lack of information from the ECB.  However, it may also due to risk off across the board today as most Yen pairs are lower (after USD/JPY ran downside stops near 109.70 early in Asia) and continues nervousness from the markets regarding the coronavirus.  However regardless of the reason, it is important to note the price action (specifically in EUR/USD), and note targets, as well as, important levels on the way to target.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.