TheNews

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

Even though the European Central Bank (ECB) is expected to retain the zero-interest rate policy (ZIRP) in September, a string of adjustments to the non-standard measures may trigger a near-term selloff in EUR/USD should the central bank take additional steps to support the monetary union.

What’s Expected:

Why Is This Event Important:

The ECB may fine-tune its asset-purchases and extend the duration of its quantitative easing (QE) program as the Governing Council struggles to achieve its one and only mandate for price stability, but the euro-dollar stands at risk of facing a similar reaction to the March 10 policy meeting should President Mario Draghi and Co. endorse a wait-and-see approach for monetary policy.

How To Trade This Event Risk

Bearish EUR Trade: ECB Adjusts/Extends QE Program

• 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 Sticks with Status Quo

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

Potential Price Targets For The Release
EURUSD Daily

• The near-term outlook for EUR/USD has become more constructive following the failed attempt to push below former resistance around 1.1110 (50% retracement), and the pair may continue to retrace the decline from the August high (1.1365) should the ECB stick to the sidelines.
• 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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(all images/charts were made using Metatrader 5 software and free indicators from MQL5 CodeBase)