An ECB Rate Cut Would Justify Bearish Technical Outlook

The ECB is expecting to cut their benchmark rate by 50 bps today according to a Bloomberg survey. However, the slew of dour financial data that has cross the wires recently including a record low reading in the service sector and a 0.8% decline in retail sales, has raised hopes for a deeper cut.





Fundamental Outlook

The ECB is expecting to cut their benchmark rate by 50 bps today according to a Bloomberg survey. However, the slew of dour financial data that has cross the wires recently including a record low reading in the service sector and a 0.8% decline in retail sales, has raised hopes for a deeper cut. Therefore, if the central bank meets expectations we could see bullish price reaction as it would signal that the MPC plans to continue their measured approach to monetary policy despite other central banks aggressive easing. President Trichet’s comments following the announcement will give the clearest signal to future bias and may have the biggest influence on longer term price direction. Technical’s are calling for an initial move higher followed by a larger decline with a target below 1.2330.

Technical Outlook


I am sticking with the triangle pattern. Triangles consist of 5 waves, a-b-c-d-e. If a triangle is underway, then wave e is underway now (possibly complete at 1.2772) and will end as a spike above 1.2772. Resistance begins at 1.28 and extends as high as 1.30. Rallies into this zone should be sold.






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