ECB is idle, euro gets cheaper

18 april 2022 92
Volkov_Anton
Volkov_Anton

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The EURUSD pair continues the steady way down. Liquidity continues to transit into the American currency because it is attracted by the higher-margin debt instrument: the yield of the 10-years United States treasury bonds has exceeded 2,8%, at a time when the yield of German bonds has exceeded only 0,8%. 

 

Certain hopes of European currency buyers are related to the regular meeting of the ECB on April 14. At minimum, the market participants have been waiting for the officers of the European regulator to tighten the rhetoric, especially considering the 7,5% growth of inflation

 

But this time ECB has preferred to drop a hint about the possible raise of the key rate from the zero level “several times after the program of APP”. Considering that APP should be finished in the 3rd quarter of the current year, the possibility to raise the key rate is delayed at least up to the 4th quarter.

 

The ECB continues to justify the saving of the initial level of interest rates with the need to maintain GDP growth that looks quite unremarkable in the background of the US economy (only +0,3% against +6,9% for the 4th quarter of 2021). Considering the recent problems with supply chains from Asia (Chinese cities are again under quarantine) and also the continuing hostilities in the East of Europe, the future statistics of the European economy don’t bode well.

 

Last week the statistics on inflation in the USA have been published. Another 40-years maximum (8,5%) hardly surprises anyone. It is necessary to promptly tighten the monetary policy as will be done at the nearest meeting of FRC on May 4. The difference between the interest rates in American and European economies will increase even more, and this indicates the further decrease of EURUSD

 

From the technical point of view, the downtrend EURUSD looks quite stable. The February breakdown of the uptrend is still unconfirmed. The annual minimums are updated again, then there is a way to the point of 1,0637 — the bottom of the panic sales in March 2020. The RSI indicator is far from the oversold zone assuming another wave of sales.   

 


The following trading strategy options can be suggested: 

 

Sell EURUSD after the rebound upwards in the range of 1,09-1,095. Take profit — 1,065. Stop-loss — 1,105.

 

Also, traders can use Trailing stop instead of the fixed Stop-loss at their disposal, when the price moves down. 

Volkov_Anton
Volkov_Anton

Listed among the best MarketCheese authors
1st in the segment "Currencies"
2nd in the segments "Indices" and "Metals"
3rd in the segment "US stocks"
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