Overview of the EUR/USD pair. September 14th. The ECB meeting will surprise the market in any case
September 14, 2023 10:23 am
The EUR/USD currency pair during the third trading day of the week showed absolutely nothing. If, in the previous few days, such movement of the pair (none) could be explained by a weak or absent fundamental and macroeconomic background, then yesterday, this reason no longer applied. The inflation report was not supposed to trigger a strong movement that would have taken the pair out of its limited range. As we can see, it didn’t do that. Moreover, the significance of inflation turned out to be such that it is very difficult to say whether it’s positive or not. The market itself didn’t understand this, so volatility once again reached 50 points and is confidently approaching the “low” concept, where entering the market makes no sense unless you are ready to keep the position open for a week or more.
Let’s consider the technical picture. The pair remains below the moving average line and has stagnated for the past five days. The downward trend is not canceled; all indicators point downward, and in the 24-hour timeframe, the price has settled below the Ichimoku cloud. Therefore, the decline of the European currency could resume at any moment. Of course, if strong information for the euro appears, we may see an upward trend, but traders have no desire to buy now; otherwise, we would have seen an upward correction after a month and a half of decline in the past five days. The price couldn’t even stay above the moving average, which has been near all this time.
The most important thing right now is the total reluctance to move. Even today’s ECB meeting could not impact the pair’s positions. Therefore, we need to wait for the end of the flat and then think about what to do with the pair.
The ECB can bring a surprise.
So, the ECB meeting will take place today, and it could be very interesting. Yesterday, we said the same about the inflation report, but in the end, nothing interesting happened. The problem is that the market needs to understand what to expect from the European regulator. Its representatives have sent many signals about a possible pause in September over the past two months. However, we still don’t know the exact number of members of the monetary committee who support a “breather” in tightening. Thus, the “hawkish” wing may prevail in the vote. Even experts cannot predict the outcome regarding the interest rate with certainty.
Christine Lagarde could have hinted at the ECB’s impending decision last week but refused to comment on the rate topic when asked. Therefore, it is still being determined what the decision will be and what scenario the market considers the base. So, let’s not “reinvent the wheel” and assume that no rate hike is the base scenario, which would likely put pressure on the euro as it would be the first pause in the current tightening cycle. And the pause would mean that the ECB is preparing to end the cycle, although the rate is still around 4%, and this clearly won’t be enough to bring inflation down to the target level of 2% in the next year. Therefore, there will be even fewer reasons for the euro to rise.
An alternative scenario is a 0.25% rate hike, which could temporarily support the European currency, as the market is already seriously considering the possibility of a pause. However, we don’t believe in a strong rise in the euro or a resumption of the global uptrend. The market has long priced in all possible rate hikes in the European Union, so in any case, in the medium term, we only look to the downside. Perhaps by the end of the year, the fundamental background will change slightly if the Fed starts signaling the end of the tightening cycle. But there are no signs of that for now, so it’s still too early to talk about it.
The average volatility of the EUR/USD currency pair for the past five trading days as of September 14th is 53 pips, characterized as “average.” Thus, we expect the pair to move between the levels of 1.0696 and 1.0802 on Thursday. An upward reversal of the Heiken Ashi indicator will indicate a new attempt to correct upward.
Nearest support levels:
S1 – 1.0742
S2 – 1.0681
S3 – 1.0620
Nearest resistance levels:
R1 – 1.0803
R2 – 1.0864
R3 – 1.0925
Trading recommendations:
The EUR/USD pair maintains a downward trend but is essentially stagnant. Short positions can now be considered with targets at 1.0696 and 1.0681 in case the price bounces off the moving average line. Long positions can be considered if the price firmly closes above the moving average (more confidently than it is now), with targets at 1.0803 and 1.0864.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both point in the same direction, the trend is currently strong.
The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the likely price channel in which the pair will move the next day, based on current volatility indicators.
CCI indicator – its entry into the overbought zone (above +250) or oversold zone (below -250) indicates a potential trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
The EUR/USD currency pair during the third trading day of the week showed absolutely nothing. If, in the previous few days, such movement of the pair (none) could be explained by a weak or absent fundamental and macroeconomic background, then yesterday, this reason no longer applied. The inflation report was not supposed to trigger a strong movement that would have taken the pair out of its limited range. As we can see, it didn’t do that. Moreover, the significance of inflation turned out to be such that it is very difficult to say whether it’s positive or not. The market itself didn’t understand this, so volatility once again reached 50 points and is confidently approaching the “low” concept, where entering the market makes no sense unless you are ready to keep the position open for a week or more.
Let’s consider the technical picture. The pair remains below the moving average line and has stagnated for the past five days. The downward trend is not canceled; all indicators point downward, and in the 24-hour timeframe, the price has settled below the Ichimoku cloud. Therefore, the decline of the European currency could resume at any moment. Of course, if strong information for the euro appears, we may see an upward trend, but traders have no desire to buy now; otherwise, we would have seen an upward correction after a month and a half of decline in the past five days. The price couldn’t even stay above the moving average, which has been near all this time.
The most important thing right now is the total reluctance to move. Even today’s ECB meeting could not impact the pair’s positions. Therefore, we need to wait for the end of the flat and then think about what to do with the pair.
The ECB can bring a surprise.
So, the ECB meeting will take place today, and it could be very interesting. Yesterday, we said the same about the inflation report, but in the end, nothing interesting happened. The problem is that the market needs to understand what to expect from the European regulator. Its representatives have sent many signals about a possible pause in September over the past two months. However, we still don’t know the exact number of members of the monetary committee who support a “breather” in tightening. Thus, the “hawkish” wing may prevail in the vote. Even experts cannot predict the outcome regarding the interest rate with certainty.
Christine Lagarde could have hinted at the ECB’s impending decision last week but refused to comment on the rate topic when asked. Therefore, it is still being determined what the decision will be and what scenario the market considers the base. So, let’s not “reinvent the wheel” and assume that no rate hike is the base scenario, which would likely put pressure on the euro as it would be the first pause in the current tightening cycle. And the pause would mean that the ECB is preparing to end the cycle, although the rate is still around 4%, and this clearly won’t be enough to bring inflation down to the target level of 2% in the next year. Therefore, there will be even fewer reasons for the euro to rise.
An alternative scenario is a 0.25% rate hike, which could temporarily support the European currency, as the market is already seriously considering the possibility of a pause. However, we don’t believe in a strong rise in the euro or a resumption of the global uptrend. The market has long priced in all possible rate hikes in the European Union, so in any case, in the medium term, we only look to the downside. Perhaps by the end of the year, the fundamental background will change slightly if the Fed starts signaling the end of the tightening cycle. But there are no signs of that for now, so it’s still too early to talk about it.
The average volatility of the EUR/USD currency pair for the past five trading days as of September 14th is 53 pips, characterized as “average.” Thus, we expect the pair to move between the levels of 1.0696 and 1.0802 on Thursday. An upward reversal of the Heiken Ashi indicator will indicate a new attempt to correct upward.
Nearest support levels:
S1 – 1.0742
S2 – 1.0681
S3 – 1.0620
Nearest resistance levels:
R1 – 1.0803
R2 – 1.0864
R3 – 1.0925
Trading recommendations:
The EUR/USD pair maintains a downward trend but is essentially stagnant. Short positions can now be considered with targets at 1.0696 and 1.0681 in case the price bounces off the moving average line. Long positions can be considered if the price firmly closes above the moving average (more confidently than it is now), with targets at 1.0803 and 1.0864.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both point in the same direction, the trend is currently strong.
The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the likely price channel in which the pair will move the next day, based on current volatility indicators.
CCI indicator – its entry into the overbought zone (above +250) or oversold zone (below -250) indicates a potential trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
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