Trading News Events: ECB Interest Rate Decision

Trading News Events: ECB Interest Rate Decision

6 November 2014, 09:54
Sergey Golubev
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  • European Central Bank (ECB) to Retain Current Policy Ahead of Next T-LTRO in December.
  • Will ECB Expand the Scope & Attractiveness of Non-Standard Measures?

The EUR/USD may face another selloff in the days ahead should the European Central Bank (ECB) adopt a more dovish tone and offer additional monetary support to prop up the ailing economy.

What’s Expected:

Why Is This Event Important:

The ECB may take a more aggressive approach in expanding its balance-sheet amid the growing threat for deflation, but we may see a relief rally in the EUR/USD should the Governing Council merely make an attempt to buy more time.

Nevertheless, ECB President Mario Draghi may promote a wait-and-see approach as the central bank continues to assess the impact of the non-standard measures, and the Euro may face a more meaningful rebound in the days ahead if we see more of the same from the Governing Council’s October 2 meeting.

How To Trade This Event Risk
Bearish EUR Trade: Governing Council Shows Greater Willingness to Implement More Easing

  • Need red, five-minute candle following the updated forward-guidance to consider a short EUR/USD trade
  • If market reaction favors a short Euro trade, sell EUR/USD with two separate position
  • Set stop at the near-by swing high/reasonable distance from cost; at least 1:1 risk-to-reward
  • Move stop to entry on remaining position once initial target is met, set reasonable limit
Bullish EUR Trade: ECB Attempts to Buy More Time
  • Need green, five-minute candle to favor a long EUR/USD trade
  • Implement same strategy as the bearish euro trade, just in the opposite direction
Potential Price Targets For The Release

EUR/USD Daily Chart

  • Despite the range-bound price action in EUR/USD, the long-term outlook remains bearish as the RSI retains the downward momentum carried over from the previous year.
  • Interim Resistance: 1.2580 (78.6% retracement) to 1.2620 (50.0% expansion)
  • Interim Support: 1.2450 (78.6% retracement) to 1.2470 (78.6% expansion)
Impact that the ECB rate decision has had on EUR/USD during the last meeting

Period Data Released Estimate Actual Pips Change
(1 Hour post event )
Pips Change
(End of Day post event)
OCT 2014 10/02/2014 11:45 GMT 0.05% 0.05% +5 +20



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