Yahoo Finance 
Dovish ECB to Fuel Bearish EUR/USD Outlook- 1.0500 in Focus
DailyFX.com -
- European Central Bank (ECB) to Keep Rates on Hold, Retain EUR 60B QE Program.
- Will ECB President Mario Draghi Speak Out Against the ‘Taper Tantrum?’
For more updates, sign up for David's e-mail distribution list.
Trading the News: European Central Bank (ECB) Interest Rate Decision
The fresh batch of rhetoric coming out of the European Central Bank (ECB) may heighten the bearish sentiment surrounding the EUR/USD should President Mario Draghi endorse a dovish outlook for monetary policy and stick to the EUR60B asset-purchase program.
What’s Expected:
Click Here for the DailyFX Calendar
Why Is This Event Important:However, we may see growing speculation for a ‘taper tantrum’ in the euro-area should Mr. Draghi adopt a more upbeat tone for the region and talk down expectations for more non-standard measures as the recent developments coming out of the monetary union beat market forecasts.
Expectations: Bearish Argument/Scenario
Release | Expected | Actual |
Retail Sales (MoM) (FEB) | -0.2% | -0.2% |
Consumer Price Index Core (YoY) (MAR A) | 0.7% | 0.6% |
M3 Money Supply (YoY) (FEB) | 4.3% | 4.0% |
The Governing Council may keep the door open to further embark on its easing cycle amid slowing price growth paired with the ongoing contraction in private-sector lending, and a greater willingness to implement more non-standard measures may generate fresh-lows in EUR/USD amid the deviation in the policy outlook.
Risk: Bullish Argument/Scenario
Release | Expected | Actual |
Industrial Production s.a. (MoM) (FEB) | 0.4% | 1.1% |
Economic Confidence (MAR) | 103.0 | 103.9 |
Construction Output (MoM) (JAN) | -- | 1.9% |
Nevertheless, we may get more of the same from the ECB amid the series of positive data prints coming out of the euro-area, and the single-currency may face a more meaningful correction over the near-term should the central bank implement a more hawkish twist to the forward-guidance for monetary policy.
Join DailyFX on Demand for Coverage of the Entire ECB Rate Decision!
How To Trade This Event Risk(Video)
Bearish EUR Trade: ECB Stays on Course & Talks Down ‘Taper Tantrum’
Need red, five-minute candle following the policy announcement to consider a short EUR/USD trade.
If market reaction favors a bearish Euro trade, sell EUR/USD with two separate position.
Set stop at the near-by swing high/reasonable distance from cost; need at least 1:1 risk-to-reward.
Move stop to entry on remaining position once initial target is met, set reasonable limit.
Bullish EUR Trade: Governing Council Adopts Improved Outlook
Need green, five-minute candle to favor a long EUR/USD trade.
Implement same strategy as the bearish euro trade, just in the opposite direction.
Read More:
COT-Euro Positioning Little Changed from Record
AUD/USD Vulnerable to Slowing China GDP- 0.7570 Support in Focus
Potential Price Targets For The Release
EUR/USD Daily Chart
Chart - Created Using FXCM Marketscope 2.0
Long-term outlook for EUR/USD remains bearish especially as the Relative Strength Index (RSI) retains the downward trend carried over from the previous year.
DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-short EUR/USD since March 9, with the ratio currently holding at -1.50.
Interim Resistance: 1.0970 (38.2% expansion) to 1.0990 (50% retracement)
Interim Support: 1.0487 (3/13 close) to 1.0515 (50% expansion)
Impact that the ECB rate decision has had on EUR/USD during the last meeting
Period | Data Released | Estimate | Actual | Pips Change (1 Hour post event ) | Pips Change (End of Day post event) |
MAR 2015 | 03/05/2015 12:45 & 13:30 GMT | 0.05% | 0.05% | +28 | -30 |
March 2015 European Central Bank Interest Rate Decision
The European Central Bank (ECB) retained the benchmark rate at the record-low of 0.05%, while President Mario Draghi announced a EUR 60B/month quantitative easing (QE) program, which would include purchases of sovereign bonds, as well as asset-backed securities and covered bonds to achieve a EUR 1T expansion in the balance sheet. At the same time, ECB also raises its growth and inflation forecasts through 2017 as the central bank anticipates the non-standard measures along with a lower exchange rate to spur a stronger recovery in the euro-area. Despite the initial uptick in EUR/USD, the single currency struggled to hold its ground following the QE announcement, with the pair slipping below the 1.1050 region to close the day at 1.1024.
--- Written by David Song, Currency Analyst and Shuyang Ren
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
To be added to David's e-mail distribution list, please follow this link.
Trade Alongsidethe DailyFX Team on DailyFX on Demand
Looking to use the DailyFX Trade Signals LIVE? Check out Mirror Trader.
New to FX? Watch this Video
Join us to discuss the outlook for the major currencies on the DailyFXForums
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.
