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Volatility may pick up big time for the euro with the ECB monetary policy statement right around the corner; here’s a look at possible setups on EUR/USD to trade the event.

Intermarket Snapshot

Equity Markets Bond Yields Commodities & Crypto
DAX: 12540.51 +0.40%
FTSE: 7509.67 -0.62%
S&P 500: 3006.27 +0.03%
DJIA: 27264.48 -0.31%
US 10-yr 2.041% -0.033
Bund 10-YR -0.385% -0.029
UK 10-YR: 0.669% -0.022
JPN 10-YR: -0.144% +0.004
Oil: 57.22 +0.79%
Gold: 1427.30 +0.39%
Bitcoin: 9678.96 -1.62%
Etherium: 207.15 -2.46%

Fresh Market Headlines & Economic data:

Upcoming Potential Catalysts on the Forex Calendar:

  • RBA’s Lowe speaks in Sydney at 4:05 am GMT (July 25)
  • German Ifo Business survey at 9:00 am GMT (July 25)
  • European Central Bank monetary policy statement at 1:30 pm GMT (July 25)
  • U.S. Durable goods orders at 1:30 pm GMT (July 25)

What to Watch: EUR/USD

EUR/USD 1-Hour Forex Chart
EUR/USD 1-Hour Forex Chart

As mentioned in the intro, we’ve got the upcoming European Central Bank’s latest monetary policy statement coming soon, which will likely bring big volatility to euro pairs. In a big event like this, liquidity is pretty important so we’ll take a look at setups on arguably the most liquid currency pair: EUR/USD.

On the one hour chart above, we can see a recent momentum move lower, likely traders pricing in what is expected to be a dovish ECB statement, especially after today’s disappointing European PMI updates. So, it’s possible that on the release of the ECB’s statement, we could get a “buy-the-rumor, sell-the-news” bounce in EUR/USD as traders take profits if the ECB statement is indeed dovish (e.g., lowering of forward guidance, weak inflation rhetoric, rate cut, etc.). In this scenario bearish EUR/USD traders should watch the 1.1200 – 1.1225 area for potential resistance/reversals candles as it was a previous support area and it is the Fibonacci retracment area of the most recent swing lower. If the market simply breaks lower from current levels (currently trading around 1.1150), momentum may pick up as this area is a major support area that held back in April of 2019.

For the bulls, it’s tough to see a scenario where the ECB is optimistic on the Europe’s outlook and/or doesn’t see the need for some form of economic stimulus. The only opportunity may be the aforementioned “buy-the-rumor, sell-the-news” reaction, but it may be a limited move as sellers could be waiting between 1.1200 – 1.1275 (previous consolidation/resistance areas).

Whatever your bias may be, always remember that price is king and that you shouldn’t try to fight it too much during top tier events despite what you think the ECB should do and how traders should react. Basically, always have a plan to limit your risk if it doesn’t go your way.  Good luck!