ECB Interest Rate Decision Could Spark a Reversal

On Thursday, the European Central Bank is expected to hike interest rates by a quarter percentage point to 3.75%. After July, the certainty of further rate hikes is unclear, leading to a craving for guidance in financial markets. The ECB may turn more cautious in signaling future policy while confirming a data-dependent approach. Core inflation remains stubbornly high, and the impact of a weakening economy on policy is uncertain. Bank lending data suggests tightening financing conditions may lead to speculation that rates are close to peaking.

EURUSD – H4 Timeframe

EURUSD, as seen from the chart, is trading within a drop-base-drop supply zone, with the intersection of the 50-period moving average. Though these aren’t exactly my premium kind of trade ideas, I believe the ‘rates’ decision from the ECB later today will go a long way to influence whether or not this ends up playing out according to the trade idea.

Analyst’s Expectations:

  • Direction: Bearish
  • Target: 1.10867
  • Invalidation: 1.11528

EURAUD – D1 Timeframe

EURAUD is clearly trading inside a wedge pattern, with the most recent price action coming from the rejection at the trendline resistance. From here, this means that we can expect to see a continued drop in prices until it reaches the trendline support – my thoughts. I understand that the moving average threatens the further decline of price. Hence the need to watch out for the outcome of the ECB release patiently.

Analyst’s Expectations:

  • Direction: Bearish
  • Target: 1.60888
  • Invalidation: 1.64472

EURCAD – D1 Timeframe

EURCAD is on its way downwards, having gotten rejected from the resistance trendline. Currently, the price action doesn’t appear to be clear yet since there hasn’t really been a clear break of structure. My plan here, however, is to watch for a break and retest either of the trendlines, then position to trade in the direction of the breakout. In the meantime, I expect that we will see a continuation of the bearish movement soon.

Analyst’s Expectations:

  • Direction: Bearish
  • Target: 1.44686
  • Invalidation: 1.48876

CONCLUSION

The trading of CFDs comes at a risk. Thus, to succeed, you have to manage risks properly. To avoid costly mistakes while you look to trade these opportunities, be sure to do your due diligence and manage your risk appropriately.