The European Central Bank raises its rate by 50 basis points
During the European Central Bank press conference, Christine Lagarde seemed to speak out of both sides of her mouth.
The ECB published the interest rate by 50 basis points to bring the refining rate to 3.00%, as expected. This is the highest level since 2008! On the other hand, I communicated that he was committed to the advancement of a complementary house of the base staff at 50 points from the March meeting. Then, decisions will be made from meeting to meeting.
Yet, during the press conference, Christine Lagarde seemed to speak out of both sides of her mouth. Off the cuff, she said the European Central Bank “intends” to cut the rate by 50 basis points. Therefore, the March rate hike does not appear to be a done deal. However, later she said that in all scenarios the important houses are needed (referring to the 50 point house from the base of Mars).
» Comment on the carry trade strategy
Like yesterday’s FOMC meeting, I communicated to the ECB that it was “as expected”, while Christine Lagarde’s press conference was less hawkish than expected and even a bit confusing.
EUR/JPY was one of the main drivers after the rate hike and the press conference that followed. After trading sideways for a week and a half between the 50-day and 200-day moving averages (140.92/141.79), the EUR/JPY pair sold off aggressively. The pair has broken below the recent range and plenty of room to run lower. First support is not until the January 3rd lows at 137.39.
In the meantime, the price could go to the 50% retracement level, then to the 61.8% Fibonacci retracement level, the 2022 lows to the 2022 highs at 136.40 and 133.56, respectively. . Resistance is close at the low of the recent range and the 200-day moving average. Above the high of the range and the 50-day moving average, price may be displeased towards the lower rising trendline of the rising wedge (the pair went below on December 20, 2022) near 145.65.
EUR/JPY daily chart
**A few hours after the press conference, as after the last press conferences, the “sources” of the European Central Bank were there to clarify anything that could have been fake or misinterpreted. This time, the sources noted that there could be one or two more rate hikes of 25 basis points or 50 basis points, and that they expect a terminal rate around 3.5%.
The European Central Bank released its rate by 50 basis points, as expected, and said it intended to hike it again at the March meeting. However, Christine Lagarde seemed less optimistic about it. The EUR/JPY pair is selling aggressively after the meeting and while waiting for the press conference. There is a lot of resistance above the pair. But if it gets back above the recent range, there’s plenty of room for it to work!
By Joe Perry, CMT, FOREX.com » Official Site
Disclaimer: The information and opinions contained in this report are provided for general information only and do not constitute an offer or solicitation to buy or sell forex cambio contracts or CFDs. Although the information contained in the document comes from sources believed to be reliable, the author does not guarantee its accuracy or completeness, and assumes no responsibility for any direct, indirect or consequential damages which may result in a breach.