The Euro will take centre stage today, as the ECB will meet & change monetary policy. Financial markets are expecting the European Central Bank to raise interest rates for the first time in 11 years. The market mostly expects a 0.25% hike, but there is a chance of a more decisive 0.5%
The ECB want to hike rates in a belated response to high Euro Zone inflation. The only problem is that European business confidence is low, there is a war in Ukraine and the Russians look likely to turn off gas supplies, plunging Europe into recession. We all know that you shouldn’t raise interest rates during a recession, but the ECB will do so.
The last time the ECB raised Interest rates was in 2011. A policy decision that was widely seen as a massive mistake. Is history going to repeat itself.
EURUSD Technical Analysis
The counter trend rally that we have seen for the past 5 days ran out of steam at 1.0280. In doing so the price formed a triple top on the EURUSD 20 pip Point and Figure chart.
Since forming the top some selling pressure has emerged, and pushed the single currency close to daily support at 1.0140/20.
Much depends on the ECB but if support at 1.0120 breaks we will likely see a return of the strong downside pressure and target 1.0080 then 1.0040, possibly sub parity 1.0000 to the 0.9960 low.
Immediate resistance is now at 1.0220, a break up from here would allow another test of the strong resistance at 1.0280.
Looking further out, there is more resistance at 1.0320 and 1.0360. If the EURUSD breaks 1.0360 it could signify a longer term change in the fortune of the single currency.