Trading plan for 26/10/2017:
The currency market drifted during the Asian session, but a fall on Wall Street is sustained by the temporary weakness of the USD. EUR is slightly higher before the ECB interest rate decision. Nothing interesting happens on the oil market, while gold uses the dollar’s weakness and extends the bounce.
On Thursday 26th of October, the main event of the day is the anticipated ECB interest rate decision and press conference. Moreover, market participants will pay attention to the Eurozone Money Supply data and during the US session to Unemployment Claims, Goods Trade Balance and Pending Home Sales data from the US.
EUR/USD analysis for 26/10/2017:
The ECB interest rate decision is scheduled at 11:45 am GMT and the press conference will be held at 12:30 pm GMT. Market participants expect the ECB to leave the interest rate unchanged at the level of 0.00% and the Asset Purchase Target is expected to remain at the level of 60 bln euro. Nevertheless, at the September’s ECB Governing Council meeting, President Mario Draghi said that «probably the bulk of these decisions will be taken in October» when asked about the pace of quantitative easing. Currently, the ECB is buying bonds with what has effectively printed money at a monthly pace of mentioned earlier 60 bln euro, a program «intended to run until the end of December 2017, or beyond, if necessary.» As of the end of September, such purchases totaled 2.1 trillion euro. Many months ago, Draghi said he didn’t think there would be an «abrupt» end to the program. So the debate has been not over whether QE will continue in 2018 but at what pace. Newswire ECB «source» stories claim an internal debate around a considerable slowdown in the pace of QE, from 60bn to 25-40bn euro starting January 2018. A decision along these lines should be largely factored in, but still could undermine the euro, as the ECB confirms that policy will remain very loose deep into next year. Moreover, interest rates will not be raised until «well past the horizon of our net asset purchases».
In conclusion, the likely scenario for today’s ECB event is no interest rate hike and an announcement of slowdown for QE from 60 bln to 30 bln euro.
Let’s now take a look at the EUR/USD technical picture at the H4 time frame. The market is about to test the golden trend resistance line again, around the level of 1.1837. Nevertheless, the price is still trading inside of the narrow horizontal zone between the levels of 1.1729 — 1.1880 as it awaits the ECB interest rate decision. Any breakout below the level of 1.1880 opens the road towards the level of 1.1936 and any breakout below 1.1729 opens the road towards the level of 1.1662.
Market Snapshot: DAX bulls losing momentum?
The price of German DAX index has been in a horizontal move in some time now and so far the swing high at the level of 13,095 has not been challenged yet. Moreover, the price is slowly getting closer to the important technical support at the level of 12,908. Any breakout lower would directly expose the next technical support at 12,711 for a test and, in a case of extension, 12,500.
Market Snapshot: GBP/JPY breaks out of the channel
The price of GBP/JPY has broken out of the dashed black channel and now is trading just above it around the level of 150.46. This is the key level for this pair, as the upward momentum is decreasing and the market is in overbought conditions. Only a sustained breakout above the technical resistance at the level of 151.59 would expose the recent swing high at the level of 152.82 for a test.