Market Focus, Key findings:
- ECB’s Weidmann says first ECB Rate Hike could follow the end of Quantitative Easing more closely than in the USA
- Industrial Producer Prices rose by 0.1% in the EURO AREA (EA19) and by 0.2% in the EU28
- European Commission forecasts EURO ZONE inflation will accelarate to 1.6 pct YoY in 2019 from 1.5 pct YoY seen in 2018
The EUR appreciates the highs of the last 10 days, following statements by the heads of the ECB (European Central Bank). Yesterday, ECB announced that it is feasible to implement the end of the Central Bank's bond purchase program until the end of 2018, stating also that inflation is rising around the objective outlined.
ECB chief economist Mr. Peter Praet also said that the European Central Bank will debate next week whether or not to reduce bond purchases gradually. Following the most diverse meetings taking place next week, the ECB Press Conference is scheduled to take place on 14th of June at 01:30 p.m. (GMT).
Meanwhile, German Central Bank President Mr. Jens Weidmann also reaffirmed that market expectations for the end of bond purchase by the end of 2018 are real, plausible and interesting.
The European economy recovered from the strong economic and financial turmoil following the economic crisis of sovereign debt, where it regained economic growth and dynamism through an unprecedented bond purchase stimulus program of 2.55 billion euros. Currently, the ECB has been discussing whether or not to close purchases by the end of the current year, since the threat of deflation has not been verified for a long time and has completely exceeded this scenario, since the EURO Zone has the best period of growth in the last decade.
Many traders may think the ECB would try to avoid any rumors of this potential scenario, given the meeting scheduled for June 14th, as market sentiment in recent weeks has been focused on uncertainty over a potential crisis scenario and political instability in Italy.
However, investors are gradually shifting their focus from last-day market sentiment to these concerns of the troubled Italian political context, as well as concerns about global trade tariffs, to a much more favorable sentiment overall market growth. Concerns for Italy began to be relegated to a secondary level as Italy's coalition government resurfaced yesterday via Prime Minister Giuseppe Conte, where he promised sweeping changes with a message implied by the EUR. Although the guarantee of leaving the single currency is not on the agenda, it is no less true that the tax cuts introduced by the new government and the increase in the social assistance spending plan triggered the Yields of the Italian Bonds, where it affected some investor confidence.
All this, and together with these comments from the heads of the ECB, have led the single currency to appreciate to the maximum of the last 10 days, for example the EUR/USD quoting above 1.17750, it seems that finally found stable a support point in the zone of 1.15328, if all these main variables of analysis are maintained.
EURUSD Weekly Chart
EURUSD Daily Chart
EURUSD
For traders wishing to position themselves on the 4-hour chart so that to take advantage of posible news announcements then they could consider the following weekly resistance and supoort levels.
Weekly Resistance 3: 1.1973
Weekly Resistance 2: 1.1850
Weekly Resistance 1: 1.1755
PIVOT POINT: 1.1632
Weekly Support 1: 1.1537
Weekly Support 2: 1.1414
Weekly Support 3: 1.1319
EURUSD
There is no doubt about it, the ECB's guidelines have returned to focus and market sentiment, driving a favorable sentiment towards the single currency.
The EUR appreciates 0.69% against the USD in 1 Day relative performance.
In sum, it seems that Italy and Spain will no longer play such an important role given the existence of new government powers duly installed in each of the countries and thus the market is focused on the ECB and its respective policy measures monetary policy, and in all future developments in the economic agenda.
Notes: Data and Quotes referenced, considered at 06.06.2018 15h00 (GMT).
Author:
Carlos Santos da Silva is a Head of Sales and Business Develpment at TeleTrade’s office in Portugal, as well as, the regular manager providing market analysis to our clients.
Carlos has 10 years of experience in the sector, from Banking, Financial and Brokerage Institutions, both for the American and European market. Forex Market (Forex) is his main passion, focus and specialization. He likes sharing his experiences with all traders, from beginners, to more experienced ones.
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