EuroStoxx50 Anticipating ECB Interest Rate Decision
Yuri Papshev | Oct 20, 2016 05:54AM ET
Trading recommendations
Sell Stop 3045.0. Stop-Loss 3065.0. Take-Profit 3030.0, 3010.0, 2978.0, 2935.0, 2890.0
Buy Stop 3065.0. Stop-Loss 3045.0. Take-Profit 3080.0, 3110.0, 3150.0
Technical analysis
Earlier this week, the index EuroStoxx50 broke key resistance level of 3030.0 (EMA200 on the daily chart) and develops an upward trend under the short-term ascending channel on 4-hour chart to the upper boundary, passing near the level of 3080.0. At the same time, the index is in descending channel on the weekly chart, so the current growth can not get above the level of their development 3080.0 (the upper limit of the downward channel on the weekly chart).
The further growth of the index, from a technical point of view, also prevents the resistance level of 3051.0, through which EMA50 on the weekly chart. Also, when you open a position in the market today, it is necessary to take into account the likelihood of a sharp increase in volatility at the time of the publication of the ECB's decision on interest rates and ECB President Mario Draghi (in time after 14:45 and 15:30 GMT + 3).
If Mario Draghi discusses the expansion of stimulus programs in the Eurozone, the EuroStoxx50 index will rise sharply. The immediate goal will be the level of 3110.0 (50.0% Fibonacci level of the correction to the wave decline from December 2015). Just above this level held the upper boundary of the rising channel on the daily chart.
Otherwise, if Mario Draghi confirms appeared recently in the press about QE program is minimized in the euro area, the European indices, including EuroStoxx50 index, will drop sharply.
Breakdown of support levels 3030.0, 3010.0 (38.2% Fibonacci level) could trigger a further decline of the index to the closest targets and levels of 2935.0 (the lower line of the rising channel on the daily chart), 2890.0 (23.6% Fibonacci level).
Although indicators OsMA and stochastic at different time intervals (4 hours, daily, weekly, monthly) point to continued growth, the ECB rate decision (other than a neutral forecast) or speech Mario Draghi may radically change the situation from a positive to a negative.
Today it is necessary to be very careful when trading the financial markets, and the best position for today - to be out of the market.
Support levels: 3030.0, 3010.0, 2978.0, 2935.0, 2890.0, 2845.0, 2700.0
Resistance Levels: 3080.0, 3110.0, 3150.0
Overview and Dynamics
After the US stock indexes rose on Wednesday and European indices. Dow Jones Industrial Average index rose by 0,2%, S&P 500 index - by 0,2%, Nasdaq Composite rose slightly less than 0.1%. EuroStoxx50 European index added 0.28% yesterday, closing at 3054.0. Today EuroStoxx50 index is trading near yesterday's closing levels. The dynamics of the index and the EUR/USD shows weak activity of traders in anticipation of the ECB's decision on interest rates. Publication of the decision is scheduled for 14:45 (GMT + 3).
Get The News You Want
The main ECB interest rate stands at 0.0% since March 10, 2016, the refinancing rate for commercial banks (interest rate at which commercial banks may place their funds on accounts with the ECB) negative and stands at -0.4%. The forecast remains neutral on rates (rates will remain at the same level). But Draghi on financial market participants are waiting for clarification of the situation recently appeared in the media that the ECB could start to turn off the program of QE in the euro area.
If the head of the ECB Mario Draghi will signal the possibility of additional easing, including the continuation of QE quantitative easing program, the EUR / USD pair will update its low point on July 25 near the 1.0955 mark, while the European indices have an incentive for further growth. Conversely, if Draghi will not exclude the possibility of folding the incentive program, the European indices decline, and the EUR / USD could rise above $ 1.1045.
Recall that the ECB is continuing QE program (quantitative easing) in the euro area, on a monthly basis by buying European assets in the amount of 80 billion euros (88 billion US dollars). Press Conference of the ECB, which will make Mario Draghi, will start at 15:30. It will be recalled that similar previous ECB decision on interest rates and the subsequent press conference, the euro slid to 3-5% in a short time. Also, a strong movement could occur in the European indices, including index EuroStoxx50 if Mario Draghi said on QE program changes, which should be completed in March 2017.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.