EUR/USD. ECB meeting results: the European regulator is unable to break the upward trend

Trading 10 Déc 2020 Commentaire »

The Euro-Dollar pair jumped by almost 100 points following the December ECB meeting and US releases, updating the two-day high at 1.2160. But buyers of the pair could not enter the area of the 22nd figure. Having retreated from the price highs, traders, however, did not leave the framework of the 21st level. This suggests that the upward trend is still in force. The bulls of the pair fought for every point gained.

The European Central Bank, at its last meeting this year, left base interest rates unchanged but also increased the size of the bond purchase program (PEPP) by 500 billion Euros (up to 1 trillion 850 billion). In addition, the ECB extended the effect of net purchases under the above-mentioned program for 9 months (until March 2022).

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Traders were fully prepared for this scenario so the Central Bank members did not manage to sink the Euro. Market participants expected even milder decisions. For example, according to previous forecasts of analysts, the PEPP should have been extended immediately for a year until mid-2022 ( in reality it was extended for 9 months). The difference is small but it still played in favor of the Euro.

On the eve of the December meeting, many experts warned that the European Central Bank could criticize the current Euro exchange rate which has risen by more than 500 points against the Dollar since the October ECB meeting and even announce currency intervention. However, this did not happen. Moreover, during her press conference, Lagarde stressed that the Central Bank did not set a target for the Euro, though the current value of the currency puts downward pressure on prices. The updated ECB forecasts also provided indirect support for the European currency. For example, Central Bank economists now forecast a 7.3% drop in Eurozone GDP this year while in September, the forecast for a decline was 8%. At the same time, the European economy should grow by 3.9% next year (the September forecast is 5%), and by 4.2% in 2022 (the previous forecast is 3.2%). Most experts surveyed by Bloomberg expected to see more pessimistic figures today.

At the end of the December meeting, the EUR/USD pair jumped to 1.2160 but a few hours after the meeting, buyers were forced to retreat from the heights they had gained. After the price impulsively failed to get close to the borders of the 22nd figure, market participants began to fix profits en masse, fearing a downward pullback. The price pullback did occur due to traders who left purchases. In addition, it became known that the decision to expand the PEPP was not unanimous. Any hint of a split in the ECB camp puts pressure on the Euro.

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On the other hand, the corrective pullback of the price is limited: the pair continues to be within the 21st figure. The pair reacted not only to the ECB meeting but also to American macroeconomic reports. First of all, the data on the labor market was disappointing. The number of initial applications for unemployment benefits did not fall below 700 thousand though in early autumn, this indicator showed a stable downward movement. Today, it jumped to the level of 853 thousand, reflecting unhealthy trends. It is worth recalling that according to the latest Nonfarm, the number of people employed in the non-agricultural sector in November increased by only 245 thousand. Experts expected to see this indicator much higher-a a higher level, almost at the level of half a million (480 thousand). The growth rate in the number of people employed in the manufacturing sector was also disappointing. Instead of the projected increase of 53 thousand, it rose by only 27 thousand. If the rate of initial applications for unemployment benefits continues to grow (approaching a million) the next nonfarms may come out much worse than the November ones.

Data on the growth of American inflation was released today. The indicators showed contradictory dynamics. The overall consumer price index on a monthly basis in November rose to 0.2%, while in annual terms, the indicator remained at the level of October. As for the core inflation index, which does not take into account volatile food and energy prices, we see a similar trend here– a small (+0.2%) increase on a monthly basis and stagnation in annual terms. In other words, inflation is still showing weak growth.

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Today's events confirmed the viability of the upward trend for the EUR/USD pair. The technical picture also shows the priority of longs. First, on the D1 and W1 timeframes, the pair is above all the lines of the Ichimoku indicator (including the Kumo cloud). Second, on the weekly chart, the price is located on the upper line of the Bollinger Bands trend indicator (on the daily chart, it is located between the middle and upper lines of this indicator). The first goal of the upward movement is the mark of 1.2177 (a 2.5-year high reached last week). The main target is still the psychological mark of 1.2200 which also coincides with the upper line of the Bollinger Bands on the daily chart.

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Analytics and trading signals for beginners. How to trade EUR/USD on December 11? Analysis of Thursday deals. Getting ready

Trading 10 Déc 2020 Commentaire »

Hourly chart of the EUR/USD pair

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The EUR/USD pair was moving towards the downward trend line on Thursday. Therefore, the upward movement was interpreted as corrective. The trend line was broken by the end of the day, but by that time the price had gone up by about 70 points. Therefore, of course, it was no longer worth entering with new long deals at the end of the movement. The most interesting thing is that right after breaking this line, a downward pullback began. And now it is not clear whether this retracement within the framework of a new upward trend or a breakdown of the trend line was false. In any case, there is such a technical picture for the euro that it is impossible to say for sure where the pair will go next. The euro/dollar pair began to move rather indistinctly following the pound/dollar. The movement that started on December 3 could even be interpreted as a flat, despite a small downward slope, but the trend line was quite convincing and its breakdown allows us to expect a new round of upward movement. Therefore, the current situation is confusing.

Novice traders witnessed a fairly strong fundamental background on Thursday. First, the results of the ECB meeting. They announced that the PEPP program was expanded by 500 billion euros and extended by nine months. This is a bearish factor for the euro, as it means easing of monetary policy. Simply put, the EU economy is not coping with the negative consequences of the pandemic and it had to provide additional assistance. At the same time, the rates remained the same. Secondly, the US inflation report did not turn out to be weaker than the forecast values, which could support the dollar. Thirdly, the number of applications for US unemployment benefits began to grow again and significantly exceeded the forecasted values, so the strengthening of the dollar was limited. One way or another, today's trading again cannot be called logical.

No news or macroeconomic reports scheduled for Friday. There will be a report on US consumer confidence, but it is not important. Thus, there will be no fundamental background tomorrow, and the pair will move purely on technique. Unfortunately, technique does not say much now. You need to wait at least for the morning before you can understand whether a new upward trend is now forming, which is also unlikely to be long-term, or whether the breakout was false and the downward movement will resume.

Possible scenarios for December 11:

1) Long positions have become relevant at the moment, since the downtrend line has been broken. However, the price has already gone up about 70 points, so it should now retreat. Also, a breakout of the trend line can be false. In such a situation, you need to wait for the morning and for additional signals. For long deals on the pair, you need to wait for a correction and a buy signal from the MACD. At least.

2) Trading down can also be relevant on Friday if the breakout turns out to be false. Formally, you can try to open short positions right now (if the MACD indicator turns down in the next few hours), but we also recommend that you wait until the morning comes in order to make sure that this assumption is true.You can look for a sell signal from the MACD in the morning, if quotes do not go above the trend line by that time.

On the chart:

Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.

Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.

Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.

The MACD indicator (14,22,3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).

Important announcements and economic reports that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid a sharp price reversal.

Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.

The material has been provided by InstaForex Company - www.instaforex.com

ECB's Lagarde Sees Significant GDP Decline In Q4

Trading 10 Déc 2020 Commentaire »

Eurozone's economic activity likely declined sharply in the fourth quarter, but less severely than in the second quarter, due to the resurgence in the coronavirus infections that hurt the services sector considerably as some big countries were forced to impose partial lockdown, European Central Bank President Christine Lagarde said Thursday. "Overall, the incoming data and our staff projections suggest a more pronounced near-term impact of the pandemic on the economy and a more protracted weakness in inflation than previously envisaged," Lagarde said in her post-decision press conference. Earlier on Thursday, the ECB unleashed a slew of stimulus for the euro area economy, the main measures being an increase in the provision for asset purchases under its pandemic emergency scheme and more favorable condition for targeted loans to banks to boost lending to the real economy.

The bank increased the size of asset purchases under it pandemic emergency purchase programme, or PEPP, by EUR 500 billion to a total of EUR 1,850 billion. The purchase horizon was extended to at least the end of March 2022 from March 2021.

"If favorable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full," Lagarde said. The PEPP envelope can be recalibrated if required to maintain favorable financing conditions to help counter the negative pandemic shock to the path of inflation, she added.

Policymakers also decided to further recalibrate the conditions of the third series of targeted longer-term refinancing operations or TLTRO III and decided to extend the period over which considerably more favorable terms will apply by twelve months, to June 2022.

The ECB also said it will conduct three additional TLTRO III operations between June and December 2021. Further, the bank raised the borrowing limit for counterparties in TLTRO III operations from 50 percent to 55 per ent of their stock of eligible loans.

The central bank left interest rates and the forward guidance on the same unchanged. Policymakers will continue to monitor developments in the exchange rate, and they stand ready to adjust all of its instruments, as appropriate, the bank reiterated. Activity in the services sector is being more adversely affected by the new restrictions on social interaction and mobility than activity in the industrial sector, Lagarde pointed out. "Looking ahead, the news of prospective roll-outs of vaccines allows for greater confidence in the assumption of a gradual resolution of the health crisis," the ECB chief said. "However, it will take time until widespread immunity is achieved, while further resurgences in infections, with challenges to public health and economic prospects, cannot be ruled out."

She also unveiled the latest ECB Staff macroeconomic projections that foresee annual real GDP growth at -7.3 percent this year, 3.9 percent in 2021, 4.2 percent in 2022 and 2.1 percent in 2023.

In September, the ECB Staff had projected 8 percent GDP contraction for this year, 5.0 percent growth for next year and 3.2 percent expansion in 2022. The bank expects GDP to decline by 2.2 percent in the fourth quarter of 2020 and to rebound only marginally in the first quarter of 2021.

The risks surrounding the Eurozone growth outlook remain tilted to the downside, but have become less pronounced, Lagarde noted. The ECB Staff projected annual inflation at 0.2 percent for this year, 1.0 percent in 2021, 1.1 percent in 2022 and 1.4 percent in 2023. In September, the forecasts were 03 percent for this year, 1.0 percent for next year and 1.3 percent for 2022.


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Euro Advances As ECB Boosts Emergency Bond Buying Scheme

Trading 10 Déc 2020 Commentaire »

The euro climbed against its major trading partners in the European session on Thursday, after the European Central Bank kept its key interest rates unchanged and expanded the pandemic emergency purchase programme as a second wave of coronavirus infections threaten to derail the Eurozone economic recovery.

The ECB increased the size of its emergency asset purchase programme, or PEPP, by ?500 billion to a total of ?1,850 billion.

The central bank said that the horizon for net purchases under the PEPP will be extended to the end of March 2022.

The Governing Council also decided to extend the reinvestment of principal payments from maturing securities purchased under the PEPP until at least the end of 2023.

The ECB said that it will further recalibrate the conditions of the third series of targeted longer-term refinancing operations.

Three additional operations will be conducted between June and December 2021 and favourable conditions on current loans would remain until June 2022.

The Governing Council decided to extend the duration of the set of collateral easing measures to June 2022.

In order to provide an effective liquidity backstop, the central bank will conduct four additional pandemic emergency longer-term refinancing operations in 2021.

The Governing Council left the main refi rate at a record low of zero percent and the deposit rate at -0.50 percent. The marginal lending facility rate is at 0.25 percent. The decision was in line with expectations.

EU leaders gather for a two-day summit in Brussels to discuss EUR 750 billion coronavirus recovery programme and the EUR 1.1 trillion EU budget for 2021-2027 as Poland and Hungary seemed to be edging toward an agreement.

European Commission President Ursula von der Leyen will brief on trade talks with the U.K., but the leaders are unlikely to have a decision or a debate on the topic.

The euro firmed against its key counterparts in the Asian session.

The euro approached 1.2119 against the dollar, climbing 0.4 percent from a low of 1.2074 set at 5:15 pm ET. The pair had closed Wednesday's deals at 1.2078. The euro is likely to face resistance around the 1.24 region, if it gains again.

Data from the Labor Department showed a modest increase in U.S. consumer prices in the month of November.

The Labor Department said its consumer price index rose by 0.2 percent in November after coming in unchanged in October. The uptick in consumer prices matched economist estimates.

The euro added 0.7 percent to touch a 6-day high of 126.62 against the yen, after falling to 125.79 at 5:15 pm ET. The pair was worth 125.88 when it ended deals on Wednesday. The euro may challenge resistance around the 129.00 mark.

The euro remained higher against the pound, at a 3-day high of 0.9126. The euro-pound pair had finished yesterday's trading session at 0.9010. Immediate resistance for the euro is likely seen around the 0.93 level.

Data from the Office for National Statistics showed that the UK economy expanded for the sixth straight month in October but the pace of growth moderated as expected.

Gross domestic product climbed 0.4 percent month-on-month, slower than the 1.1 percent growth seen in September. This was the sixth consecutive monthly growth.

The euro bounced off to 1.0759 against the franc, after having declined to over a 4-week low of 1.0736 at 5:30 pm ET. At Wednesday's close, the pair was valued at 1.0746. Should the euro strengthens further, it is likely to test resistance around the 1.09 region.

In contrast, the European currency weakened to 1.5438 against the loonie, its lowest level since November 12. The euro was trading at 1.5480 per loonie at yesterday's close. The euro is seen locating support around the 1.52 mark.

The euro pulled back from Asian session's 2-day high of 1.7225 against the kiwi, with the pair trading at 1.7182. At yesterday's trading close, the pair was quoted at 1.7197. Next possible support for the euro is found around the 1.67 level.

Data from Statistics New Zealand showed that New Zealand electronic retail card spending rose 1.4 percent on year in November - slowing from 8.2 percent in October.

On a monthly basis, spending was up 0.1 percent after spiking 8.8 percent in the previous month.

The euro was down against the aussie, at more than a 2-week low of 1.6130. The euro-aussie pair was worth 1.6215 at Wednesday's close. Further drop in the currency may face support around the 1.58 level.


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*ECB Lowers 2021 EZ Growth Forecast To 3.9% From 5% Seen In September

Trading 10 Déc 2020 Commentaire »

ECB Lowers 2021 EZ Growth Forecast To 3.9% From 5% Seen In September


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*ECB Sees GDP Fall Of 7.3% This Year Vs. -8.0% Seen In September

Trading 10 Déc 2020 Commentaire »

ECB Sees GDP Fall Of 7.3% This Year Vs. -8.0% Seen In September


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U.S. Consumer Prices Rise In Line With Estimates In November

Trading 10 Déc 2020 Commentaire »

A report released by the Labor Department on Thursday showed a modest increase in U.S. consumer prices in the month of November.

The Labor Department said its consumer price index rose by 0.2 percent in November after coming in unchanged in October. The uptick in consumer prices matched economist estimates.

The modest increase in consumer prices was broad-based, with no component accounting for more than a quarter of the increase.

The report said food prices edged down by 0.1 percent in November after rising by 0.2 percent in October, while energy prices climbed by 0.4 percent after inching up by 0.1 percent.

Excluding food and energy prices, core consumer prices still edged up by 0.2 percent in November after showing no change in the previous month. Economists had expected core prices to inch up by 0.1 percent.

The uptick in core prices reflected higher prices for lodging away from home, household furnishings and operations, recreation, apparel, airline fares, and motor vehicle insurance.

Meanwhile, the report said prices for used cars and trucks, medical care, and new vehicles all declined over the month.

The report said the annual rates of growth in consumer prices and core consumer prices were unchanged from the previous month at 1.2 percent and 1.6 percent, respectively.

"Today's continued benign inflation readings support our call that Fed will not lift rates from the effective lower bound until mid-2024," said Kathy Bostjancic, Chief U.S. Financial Economist at Oxford Economics.

On Friday, the Labor Department is scheduled to release a separate report on producer price inflation in the month of November.


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European Central Bank Unveils Fresh Stimulus

Trading 10 Déc 2020 Commentaire »

European Central Bank announced a fresh round of stimulus in the form of more asset purchases and ultra cheap loans to banks, on Thursday to support the euro area economy amid the heightened uncertainty surrounding the coronavirus pandemic. "The monetary policy measures taken today will contribute to preserving favorable financing conditions over the pandemic period, thereby supporting the flow of credit to all sectors of the economy, underpinning economic activity and safeguarding medium-term price stability," the ECB said in a statement.

"At the same time, uncertainty remains high, including with regard to the dynamics of the pandemic and the timing of vaccine roll-outs."

Policymakers will continue to monitor developments in the exchange rate, and they stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry, the bank said.

Delivering on its promise of a recalibration of the monetary policy instruments, the ECB increased the size of its pandemic emergency purchase programme, or PEPP, by EUR 500 billion to a total of EUR 1,850 billion. The horizon for net purchases under the PEPP was extended to at least the end of March 2022. The bank said the Governing Council will conduct net purchases until it judges that the coronavirus crisis phase is over.

The reinvestment of principal payments from maturing securities purchased under the PEPP was extended until at least till the end of 2023. The future roll-off of the PEPP portfolio will be managed to avoid interference with the appropriate monetary policy stance, the bank reiterated. Policymakers also decided to further recalibrate the conditions of the third series of targeted longer-term refinancing operations or TLTRO III and decided to extend the period over which considerably more favorable terms will apply by twelve months, to June 2022.

The ECB also said it will conduct three additional TLTRO III operations between June and December 2021. Further, the bank raised the borrowing limit for counterparties in TLTRO III operations from 50 per cent to 55 per cent of their stock of eligible loans.

The central bank also said that the recalibrated TLTRO III borrowing conditions will be made available only to banks that achieve a new lending performance target. This is meant to provide an incentive for banks to sustain the current level of bank lending. In its previous meeting on October 29, ECB President Christine Lagarde had clearly signaled that the bank was ready to take policy action in December as policymakers will be presented with the latest set of ECB staff macroeconomic projections.

Policymakers' comments thereafter had also hinted at a possible expansion of the pandemic emergency purchase programme, or PEPP, and more targeted lending to banks in the form of TLTROs. The resurgence in the?coronavirus?or Covid-19 pandemic has seen countries like Germany and France return to partial lockdown. However, the news of vaccine approval has kindled hopes of an economic revival across the world. "All these steps are real central bank engineering, something ECB President Christine Lagarde called 'recalibration' at the October meeting, but no actual stepping up of monetary stimulus," ING economist Carsten Brzeski said.

"Instead, the ECB's main aim is to extend the current level of monetary accommodation until mid-2022."

On Thursday, the bank left its three interest rates unchanged as expected. The main refi rate was retained at a record low zero percent and the deposit rate was kept at -0.50 percent. The lending rate was left unchanged at 0.25 percent. The Governing Council retained its forward guidance on interest rates, saying it expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2 percent within its projection horizon.

In other stimulus measures unveiled on Thursday, the ECB decided to extend to June 2022 the duration of the set of collateral easing measures adopted by the Governing Council on April 7 and 22 this year. These will be reviewed before June 2022, the bank said.

The Governing Council also decided to offer four additional pandemic emergency longer-term refinancing operations, or PELTROs, in 2021, which the ECB said will continue to provide an effective liquidity backstop.

The size of the monthly asset purchases under the asset purchase programme (APP) was retained at EUR 20 billion. Rate-setters continue to expect monthly net asset purchases under the APP to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.

The ECB also extended the Eurosystem repo facility for central banks (EUREP) and all temporary swap and repo lines with non-euro area central banks until March 2022.

The regular lending operations will continue as fixed rate tender procedures with full allotment at the prevailing conditions for as long as necessary, the bank said.


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U.S. Jobless Claims Jump Much More Than Expected To 853,000

Trading 10 Déc 2020 Commentaire »

First-time claims for U.S. unemployment benefits showed a significant increase in the week ended December 5th, according to a report released by the Labor Department on Thursday.

The report said initial jobless claims jumped to 853,000, an increase of 137,000 from the previous week's revised level of 716,000.

Economists had expected jobless claims to rise to 725,000 from the 712,000 originally reported for the previous week.

With the much bigger than expected increase, jobless claims reached their highest level since hitting 873,000 in the week ended September 19th.

The Labor Department said the less volatile four-week moving average also climbed to 776,000, an increase of 35,500 from the previous week's revised average of 740,500.

Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, also surged up by 230,000 to 5.757 million in the week ended November 28th.

The four-week moving average of continuing claims fell to 5,935,750, a decrease of 260,250 from the previous week's revised average of 6,196,000.

"The Thanksgiving holiday may still be wreaking some havoc with the data, but the underlying picture is still one of weak labor market conditions as the coronavirus surges," said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.

A closely watched report released by the Labor Department last Friday showed U.S. job growth slowed by much more than anticipated in the month of November.

The Labor Department said non-farm payroll employment rose by 245,000 jobs in November after jumping by a downwardly revised 610,000 jobs in October.

Economists had expected employment to increase by 469,000 jobs compared to the addition of 638,000 jobs originally reported for the previous month.

Despite the weaker than expected job growth, the unemployment rate dipped to 6.7 percent in November from 6.9 percent in October. The unemployment rate was expected to edge down to 6.8 percent.


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EUR/USD : l’euro bondit face au dollar après les annonces de la BCE

Trading 10 Déc 2020 Commentaire »
La Banque Centrale Européenne adopte de nouvelles mesures de soutien