Will they follow the BoC?
By: Ahura Chalki
Market analyst – IFC Markets
Today, the main event will be the ECB meeting; eyes all turn on that. After yesterday’s BoC tapering of its purchase program, and even though if we do not expect any changes in interest rates and monetary policies, however, any signal of possibility of change in any near future must be affected on the market.
The European Central Bank has left its monetary policy on hold in past months, as widely also it was expected, with its deposit rate at -0.5%, the primary refinancing rate at 0%, and asset purchases at 20 billion euros ($22 billion) a month.
In today’s meeting and Mrs. Laggard’s press conference, we are looking for any signal of broadly balanced growth risk evaluation covering the way for PEPP buying to reverse to around EUR60bn/ month in the second half of the year. Hence, the press conference at 14:30 CET will be so important to watch.
The pairing is currently trading above its pivot point at 1.2025, above both 20&50 DMA lines. Price is above OBV trend line and RSI at 64 and tangentially with the upper line of Bollinger Bands; however, it could not pass the R1 at 1.2052. If the pairing can pass the R1, then the second and third resistance will be in the spotlight, respectively, at 1.2070 and 1.2100. On the flip side, under the pivot point, essential support sitting at 1.200, which breaching under this level, will send the pairing to deeper levels at 1.1980 and 1.1960. If ECB holds current positions but has the outlook of near future tapering of PEPP amount, then-current uptrend must continue forward.
Euro is getting stronger against the pound as well. In its daily chart, as you can see in the below chart, the price is back above the trend line and passing the vital level of 0.8630, which currently is a pivot point as well. Since RSI is above 50 and price above the trend line, an uptrend from the current level is more likely; however, the EMA crossing strategy still cannot confirm it. Primary levels of pairings are:
Support levels: 0.8620 / 0.8600 / 0.8590
Resistance levels: 0.8652 / 0.8665 / 0.8683
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