Technically, things look logical
Hi dear colleagues!
Today crucial events are on investors' radars. The ECB is due to decide on further monetary policy, in particular the key interest rate. The policy announcement will be followed by the press conference of President Christine Lagarde. Thus, I find it appropriate to remind you of some important things. First, let me turn your attention to the measures taken by the EU authorities to support the ailing EU economy in the wake of the COVID-19 pandemic. The EU leaders adopted multi-billion stimulus packages to the total value of €850 billion in view to bolstering economic growth in all EU member countries from the pandemic aftermath. The EU authorities cared about keeping employment and wages of people who suffered from COVID-19 restrictions. So, the European Commission launched the SURE program (the temporary Support to mitigate Unemployment Risks in an Emergency) and The next EU generation program. They aim to facilitate access to soft loans in any EU country.
These programs are funded through the issue of 5-year bonds to the total amount of €850 billion. Remarkably, the EU borrowed such big money for the first time in its not so long history. Nevertheless, EU policymakers took everything into account. Thanks to the EU high credit rating, investors, who buy such 5-year bonds, run minor risks. So, EU leaders are taking joint efforts to build the resilient common European economy that, in turn, raises the credit for the single European currency.
According to estimates of the EU authorities, the pay-off period of the rescue program will complete roughly by 2058. Yesterday, the European Commission posted a report to confirm interim progress in implementation of stimulus programs. The authorities managed to mitigate notably the fallout from the pandemic-driven crisis. Interestingly, macroeconomic data from the EU prove the green shoots of recovery.
To finish the fundamental part of the article and proceed to technical analysis, I'd like to point out that the euro will be sensitive to the rhetoric of ECB President Christine Lagarde. As the key interest rate is widely expected to be put on hold at zero, the rhetoric will take center stage.
Daily chart
As we see, following a climb to 1.2079 on April 20, EUR/USD has lost the bullish momentum. Afterwards, the price retraced to the psychological level of 1.2000. Besides, the currency pair retreated to the lower border of the daily Ishimoku cloud. All in all, the technical picture looks logical and decent. Today, the lower border of the Ishimoku cloud is passing through 1.1975 supported by the red Tenkan line of Ishimoku indicator. It will serve as extra support in case the bears will try to push the price out of the cloud. At the same time, the upper border is still going along 1.2092, i.e. a bit higher than the recent highs at 1.2079. Personally, I guess the direction in which the price will leave the daily Ishimoku cloud will determine a further trajectory of EUR/USD. The resistance zone is 1.2079 – 1.2092 and the support area is 1.2000 – 1.1975.
Actually, it's rather tricky to give you trading tips. The current situation is rather complicated to take trading decisions amid the important ECB-related event. Nevertheless, bearing in mind yesterday's pullback to 1.2000 and the consequent upward reversal which formed a long lower shadow at the candle from April 21, I venture to suggest a retest of resistance at 1.2079. Besides, the euro bulls will make an attempt to pull the price out of the cloud upwards. At the moment of writing this article, EUR/USD was gaining ground, trading at near 1.2045. I would advise you to consider long positions at price dips to the area of 1.2038 – 1.2010. If appropriate bullish candles appear in the charts with smaller time frames, this would support my idea.
On the other hand, we cannot rule out gainful sell positions. I would recommend considering short positions if we recognize reversal bearish candle patterns below the level of 1.2079 or in the area of 1.2079 – 1.2092. Let warn you to be on alert and cautious, especially during the press conference of Christine Lagarde. Please beware of higher volatility and sharp mixed price swings during the speech of the ECB leader.
Good luck!
