TheNews

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

Even though the European Central Bank (ECB) is widely anticipated to retain its current policy in October, the EUR/USD may face a sharp move should President Mario Draghi & Co. take additional steps to further support the monetary union.

What’s Expected:

Why Is This Event Important:

After cutting the growth forecast in September, the Governing Council may push out the deadline for its quantitative easing (QE) program and adjust the guidelines of its non-standard measures in an effort to encourage a stronger recovery. However, more of the same from the ECB may trigger a bullish reaction in the single-currency should the central bank stick to the March 2017 deadline for its asset-purchases.

How To Trade This Event Risk
Bearish EUR Trade: Governing Council Extends/Adjusts 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: ECB Preserves Current Policy, 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

• Failure to preserve the upward trend from December raises the risk for a further decline in EUR/USD, but the lack of momentum to test the July low (1.0952) may foster a near-term rebound in the exchange rate especially as the Relative Strength Index (RSI) struggles to break below 30 and push into oversold territory.
• Interim Resistance: 1.1420 (23.6% retracement) to 1.1428 (June high)
• Interim Support: 1.0912 (June low) to 1.0940 (61.8% retracement)

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