Will ECB hike rates by 75 bps or nah?
Let’s check out EUR/USD’s 1-hour downtrend ahead of the central bank event!
Before moving on, ICYMI, yesterday’s watchlist looked at a new trend forming after GBP/AUD broke above a key resistance. Be sure to check out if it’s still a valid play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
BOC raised rates by 75 bps to 3.25%, the highest borrowing rate since 2008
Canada’s Ivey August PMI jumps to 60.9, above July’s 49.6EIA: U.S. crude output and petroleum demand to rise in 2022
RICS: Buyer demand drops but record low stock props up house price growth
Australia’s trade surplus plummets from record highs as exports shrink
RBA Gov. Lowe: “…the case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises”
NZ manufacturing sales down by 3.8% vs. 0.9% uptick in Q1
Upcoming Potential Catalysts on the Forex Economic Calendar:
ECB’s policy decision at 12:30 pm GMT
U.S. initial jobless claims at 12:30 pm GMT
ECB’s presser at 12:45 pm GMT
Fed Chairman Powell to give a speech at 1:10 pm GMT
U.S. crude oil inventories at 3:00 pm GMT
China’s CPI and PPI reports at 1:30 am GMT (Sept 9)
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
What to Watch: EUR/USD
EUR/USD has been making lower highs and lower lows since late August when the pair saw a big-ish downswing.
The pair is now trading closer to parity, which lines up with a descending channel resistance on the 1-hour time frame.Stochastic also favors a bearish move after juuuust leaving the overbought territory.
Recall that the euro found some support against the dollar earlier this week thanks to lower Treasury yields and a bit of profit-taking from USD strength.
But the eurozone is still poppin’ weak PMIs and is headed for an energy crisis.
Today’s ECB event could shake things up for EUR/USD’s downtrend.
Markets expect ECB President Lagarde and her team to raise their interest rates by at 75 basis points to combat high inflation.
Not all analysts are convinced, though. Some believe that lower growth prospects would lead to some restraint from some ECB members.
If markets are not convinced that the ECB’s plans would help inflation, or if today’s Powell speech inspires another round of USD buying, then EUR/USD could extend its downtrend.
EUR/USD could head towards .9930 or even September’s lows near .9880 before EUR buyers show up.
Meanwhile, extended risk-taking and USD-selling could push EUR/USD above its channel resistance.
A clear break above parity could boost EUR/USD to areas of interest like 1.0065 or 1.0125.