The ECB is expected to cut their benchmark rate by 50 bps to 1.50% which would be the lowest in its brief history. The MPC has been reluctant to cut rates close to zero as it fears that it might trap itself without further recourse if the economy should continue to weaken.
[B]Fundamental Outlook[/B]
The ECB is expected to cut their benchmark rate by 50 bps to 1.50% which would be the lowest in its brief history. The MPC has been reluctant to cut rates close to zero as it fears that it might trap itself without further recourse if the economy should continue to weaken. Unlike other central banks off balance sheet options are more difficult as the MPC would have to choose from which country to buy assets. Therefore, a slim possibility exists that they could keep rates on hold as they decide to leave their options open. A rate hold would validate the bullish Euro technical outlook which is warning of a sharp reversal in price action. However, the central bank wil most likely cut rates which could send the EUR/USD back to test support at 1.2500
[B]Technical Outlook [/B]
The last month has been so extremely frustrating from a forecasting / trading perspective. Since the January 23th low, the EURUSD has unfolded in a triangle and terminal thrust or zigzag and ending diagonal or both. The point is that all price action for over the past month has been corrective. Know though that once the turn occurs, it will likely be fast as turns that occur from ending diagonals are quick. Until that turn occurs, the EURUSD likely continues its frustrating choppy trade. There are 2 areas to look for longs; the low side of the diagonal line and a break of the top side.
For More Technical Analysis Visit the Daily Technical Report
[I]To discuss this report contact John Rivera, Currency Analyst: [email protected][/I]