In a nutshell, the ECB remains supportive of the current policy structure and QE in place. According to King Mario, the ECB don’t intend to hike its interest rate in order to support its fledgling banking sector but instead wants to keep it accommodative and if need be, it can also extend its QE both in size or duration. Remember, this ECB Policy meeting was the centre of attraction and may wanted to know exactly how Mario plans about the future rates. According to him, despite the ultra low and very loose monetary policy, its effect on the Eurozone is minimal-particularly when it comes to inflation and growth. Surrounding fundamentals underlying growth and inflation outlook remains subdued and it is increasingly likely that ECB will stick to a cautious approach as it accumulate its supportive evidence of growth and inflation expectation before tapering its QE or taking on an hawkish tone. Therefore with hindsight, the pragmatic approach here is to short the Euro when there is a shorting opportunity in the daily chart and there is one in this currency pair.
Technically, price action is overextended in the daily chart. Two consecutive candlesticks have closed above the upper BB and with a 2% standard deviation, price will likely correct and this is where we jump in and trade with the trend. Additionally, there is a sell signal printed by the stochastics. Our stops and take profit targets should be determined by this week’s highs and lows and it should pan out as follows:
Sell Limit: 1.4610-40
Stop Loss: 1.4670
Take Profit: 1.4160
Watch out for Euro zone CPI in the London Session and later the US QoQ Preliminary GDP in the NY session.
Have a profitable trading day and a good weekend.