News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Real Time News
  • The Nasdaq 100 and Russell 2000 find themselves with significantly different technical formations but traders may find cause for optimism in both indices. Get your weekly equities technical forecast from @PeterHanksFX here: https://t.co/22fvav620W https://t.co/ajXEhMQhUp
  • Becoming a forex trader means living and breathing the excitement, risk and reward of trading in the biggest and most liquid market in the world. Do you have what it takes? Read here to discover the qualities and processes it takes to build consistency: https://t.co/EfWEACQ6Cz https://t.co/wRwHXFbbBW
  • Becoming a forex trader means living and breathing the excitement, risk and reward of trading in the biggest and most liquid market in the world. Do you have what it takes? Read here to discover the qualities and processes it takes to build consistency: https://t.co/EfWEACQ6Cz https://t.co/ZWwGB8J6I7
  • Ethereum is starting to outperform Bitcoin again ahead of ETH’s latest upgrade, while Binance continues to pare back business areas amid ongoing regulatory pressure. Get your crypto forecast from @nickcawley1 here: https://t.co/ul4TIfI9bv https://t.co/Ht5Mr0uu91
  • Do you know how to properly Identify a double top formation? Double tops can enhance technical analysis when trading both forex or stocks, making the pattern highly versatile in nature. Learn more about the double top formation here: https://t.co/t9Flsqcxo9 https://t.co/m06h4hjwVP
  • It’s important for traders to be familiar with FX spreads as they are the primary cost of trading currencies. Understand a pair's spread here: https://t.co/zEEUHZBx7g https://t.co/LcfxFxFrTY
  • Forex sentiment analysis can be a useful tool to help traders understand and act on price behavior. Learn how to get the most out of understanding trader sentiment here: https://t.co/rJznrXkcYz https://t.co/UgYlEILK5n
  • Emotions are often a key driving force behind FOMO. If left unchecked, they can lead traders to neglect trading plans and exceed comfortable levels of risk. Read on and get your emotions in check here: https://t.co/eILWbFgHRE https://t.co/BXp2z6E0Kl
  • Greed is a natural human emotion that affects individuals to varying degrees. Unfortunately, when viewed in the context of trading, greed has proven to be a hindrance more often than it has assisted traders. Learn how to control greed in trading here: https://t.co/kODPAfJE79 https://t.co/xGuTYZqYwh
  • There are three major forex trading sessions which comprise the 24-hour market: the London session, the US session and the Asian session. Learn about the characteristics of each session here: https://t.co/reRmDe1Ksp https://t.co/EvRHfRQLgk
Euro Turns to ECB for Directional Cues: EUR/GBP, EUR/USD in Ranges

Euro Turns to ECB for Directional Cues: EUR/GBP, EUR/USD in Ranges

Christopher Vecchio, CFA, Senior Strategist

Talking Points

- The Euro trade-weighted exchange rate is up by +9.7% year-over-year, and inflation in the Eurozone continues to run well below the ECB’s medium-term target of +2%: this is a mix that calls for a dovish hue to ECB commentary.

- Many EUR-crosses remain trapped in ranges, in particular, EUR/GBP and EUR/USD; the former is closer to a breakout than the latter.

- Retail trader sentiment suggests further gains are possible for both EUR/GBP and EUR/USD, given positioning ahead of the meeting.

For longer-term technical and fundamental analysis, and to view DailyFX analysts’ top trading ideas for 2018, check out the DailyFX Trading Guides page.

The European Central Bank’s March meeting today will produce a new set of Staff Economic Projections. This is one of the four meetings during the year in which the central bank does so, raising the bar in terms of risk for the Euro.

Given that the Euro trade-weighted exchange rate is up by +9.7% year-over-year, and inflation in the Eurozone continues to run well below the ECB’s medium-term target of +2%, it seems inevitable that there will be some degree of pushback from President Mario Draghi and the Governing Council over an early exit from their QE program. Just how much is the question.

Indeed, even if policymakers continue to point to another small taper once the current pace runs its course in September 2018, they are likely to signal that there will be a ‘buffer window’ in which no more asset purchases are being untaken but rates will remain on hold. We’re not looking for the ECB to signal that they’ll be raising rates until at least Q3’19.

Overall, it appears that we could be looking at a redux of the January meeting in terms of price action: when all is said and done, EUR-crosses will end the day closer to their opening levels than choosing a direction overall.

Price Chart 1: EUR/USD Daily Timeframe (July 2017 to March 2018)

Euro Turns to ECB for Directional Cues: EUR/GBP, EUR/USD in Ranges

EUR/USD has carved out a new range between 1.2155 and 1.2559 over the past three weeks, with both support and resistance defined by daily key reversals. Even though price remains above its daily 8-, 13-, and 21-EMA envelope, momentum indicators such as MACD and Slow Stochastics have only started to turn higher.

Given the backdrop for the US Dollar, whereby the path of least resistance is lower in the DXY Index, it would stand to reason that without a firm dovish tone by the ECB today, EUR/USD seems more likely to naturally test the topside of its key reversal range near 1.2559 over the coming sessions than the support near 1.2155.

Price Chart 2: EUR/GBP Daily Timeframe (August 2017 to March 2018)

Euro Turns to ECB for Directional Cues: EUR/GBP, EUR/USD in Ranges

EUR/GBP's slight descending channel since September 2017 has been on our radar for some time, even as price action flattened out to carve out a more sideways trend since December. However, in recent days, with price holding above the daily 8-, 13-, and 21-EMAs, and with both MACD and Slow Stochastics pointing higher, we've seen EUR/GBP put in a test of both the sideways range and descending channel resistance between 0.8929 and 0.8968.

Traders should be on alert for a breakout opportunity to the topside in the event that Draghi & co fail to talk down the exchange rate; although given where highs in EUR/GBP have appeared over the past six months, it would seem unlikely that gains would have an easy time making their way much higher than 0.9045 in the near-term. A failure by EUR/GBP to breakout today would go hand-in-hand with EUR/USD tilting back towards its key reversal range support near 1.2155.

Read more: US Dollar Back in Downtrend as Trade War Rhetoric Intensifies

FX Trading Resources

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com.

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX.

To receive this analyst’s reports, sign up for his distribution list.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES