TheNews

Trading the News: European Central Bank (ECB) Interest Rate Decision

The European Central Bank (ECB) interest rate decision may fail to generate a meaningful market reaction as the Governing Council is widely anticipated to retain the zero-interest rate policy (ZIRP) in June, but the fresh batch of central bank rhetoric may drag on EUR/USD should President Mario Draghi and Co. keep the door open to implement more non-standard measures.

What’s Expected:

Why Is This Event Important:

The Euro may struggle to hold its ground should the ECB show a greater willingness to further embark on its easing cycle, but the single-currency may catch a bid if the Governing Council largely endorses a wait-and-see approach all the while the monetary union returns to its historical role as a net-creditor to the rest of the world.

How To Trade This Event Risk

Bearish EUR Trade: ECB Shows Greater Willingness to Deploy More Easing

• Need red, five-minute candle following the policy statement to consider a short EUR/USD trade.
• If market reaction favors a bearish Euro trade, sell EUR/USD with two separate position.
• Set stop at the near-by swing high/reasonable distance from cost; need at least 1:1 risk-to-reward.
• Move stop to entry on remaining position once initial target is met, set reasonable limit.

Bullish EUR Trade: Governing Council Endorses Wait-and-See Approach

• Need green, five-minute candle to favor a long EUR/USD trade.
• Implement same strategy as the bearish euro trade, just in the opposite direction.

Potential Price Targets For The Release
EUR/USD Daily

• The bullish trend from December may reassert itself over the coming days as EUR/USD breaks out of the downward trend from May and appears to be carving a near-term bottom around 1.1090 (50% retracement) to 1.1110, while the Relative Strength Index (RSI) shows a similar dynamic, with the oscillator largely breaking out of the bearish formation.
• Key Resistance: 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement)
• Key Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)

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