Although it was predicted that Mario Draghi would arrange a local catastrophe, the outcome of the meeting of the European Central Bank was not so terrifying. As expected, the deposit rate was reduced from -0.4% to -0.5%. In addition, a debt purchase program of €20 billion per month will continue as long as necessary. That is as much as the European Central Bank decides. In addition, Mario Draghi said that rates will not increase until inflation stabilizes above 2.0%. Frankly, from all this, it follows that the next step of the ECB is to lower the refinancing rate. Most importantly, we still have to wait a long time for at least some tightening of the monetary policy of the ECB. And it is not a fact that Christine Lagarde, who will take the post of head of the ECB on November 1, will become not only the first woman in this post, but also the person who will nevertheless end the era of super-soft monetary policy.
However, the single European currency did not decline for a long time, and quickly returned to the values it was at before the announcement of the results of the European Central Bank meeting. The fact is that investors unexpectedly drew attention to inflation in the United States, which suddenly fell from 1.8% to 1.7%. But it had to remain unchanged. This alignment automatically made everyone recall the horror story about the inevitable reduction in the refinancing rate of the Federal Reserve. Moreover, if in addition to declining inflation, the European Central Bank also softens its monetary policy.
United States inflation:
Today, there are all the prerequisites for the further strengthening of the single European currency. The reason should be the data on retail sales in the United States, the growth rate of which may slow down from 3.4% to 3.2%. If these forecasts come true, it turns out that not only is inflation slowing down, but consumer activity is also declining. This is an explosive mixture, which will inevitably lead to lower profits of US companies. In other words, cries about the fact that the Fed has no choice but to immediately reduce the refinancing rate will seriously put pressure on the psyche of investors.
Retail Sales Growth Rate (US):
The EUR/USD pair showed really strong fluctuation, where the current year's low was touched (1.0926), and a rapid return to the starting point of the course at 1.1080. What was the reason for such rapid fluctuations, I described above, but few people expected such a spread in the price of 150 points. Considering everything that happens in general terms, we see that conditionally the correction phase has nowhere to go and the price actually continues to be above the psychological mark of 1,1000 with long shadows behind and a desire to further move upward.
It is likely to assume that the upward interest will still remain for some time in the market, where traders are considering the move to 1.1110/1.1125, where the peak of the previous accumulation along with the Fibo level of 38.2 is located.
Concretizing all of the above into trading signals:
• Long positions, we consider in terms of progress to points 1,1110/1,1125.
• We consider short positions in case of loss of upward interest in relation to current points and price consolidation lower than 1.1050.
From the point of view of a comprehensive indicator analysis, we see that indicators relative to all the main time periods signal a further growth in prices. It is worth considering such a moment that due to sharp price fluctuations, indicators arbitrarily began to change their readings.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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