Euro holds firm in forex after ECB rate hike, but not out of the woods
- The ECB raises its interest rate by 50 basis points, despite worries in the banking sector.
- The Euro edged lower, buybacks rebounded and the DXY Dollar Index retreated amid improving market sentiment.
- EUR/USD is capped above 1.0600, but far from 1.0500.
the course of the pair EUR/USD a slight rise in forex today on what turned out to be a surprisingly calm day. The market’s reaction to the changes to the European Central Bank (ECB) decision is particularly limited, and includes currency pairs including the euro. Shares rose on Thursday and weighed on the US dollar. Before the Asian session, the markets consolidated, still surrounded by uncertainties and before the week of the Federal Reserve.
The European Central Bank raised its rate managers by 50 basis points in line with the consensus. The reaction of the financial markets shows that it was not a surprise and that the expectations of a lesser rise were weak. The statement was neither accommodating nor warmongering. The central bank clarified that inflation remained in the spotlight. The first sentence of the monetary policy statement is lit as follows: “inflation is likely to remain too high for too long”, and the second paragraph indicates that the ECB is “closely monitoring the current tensions in the market and intends to react if necessary to reserve price stability and financial stability”. stabilized in the euro area. A balance between inflation (recognized first) and financial stress.
The ECB dropped forward guidance (also expected), offering no index for May’s policy decision. Analysts continue to see more ECB rate hikes. However, this will depend on the evolution of the current tensions in the banking sector. On Friday, Eurostat releases the final reading on Eurozone consumer inflation, which is expected to be a non-event.
The US dollar index DXY weakened amid improving market sentiment. If systemic fears continue to abate, the greenback could get the edge. Data released on Thursday showed the Philadelphia Fed manufacturing index improved in March to -23.2 vs -24.3, below market consensus -14.5; Initial jobless claims fell after surging last week; Housing starts and building permits unexpectedly rebounded to 1.45 and 1.52 million, respectively, showing positive signs from the housing sector after months. On Friday, the Fed will release industrial production data and the University of Michigan its consumer sentiment report.
EUR/USD Judicial Technical Outlook
The chart in the newspapers showed that the price of the EUR/USD pair came back from a critical support (Fibonacci retracement, a crucial horizontal support band and the simplest moving movement (SMA) of 100 days before the zone 1.0500 The upside momentum was not enough to regain support at the 20-day moving average SMA at 1.0635, below 1.0500 could lead to an acceleration downside.
Ahead of the Asian session, the 4-hour chart shows EUR/USD stable at 1.0615, after the 20-period SMA. Technical indicators are flat, affected by many hours of consolidation. Above 1.0635, the euro could reach 1.0660 and then 1.0700. On the contrary, below 1.0580, another move towards monthly lows looks likely.
By Matias Salord, FXStreet
Matías Salord is an economist with studies in social communication. I have over 10 years of experience specializing in financial markets. Matias works with FXStreet after 2009 in the news and analysis section.
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