Potential signal:
- If this pair is above the 0.85 level after the ECB press conference, I’m willing to buy it.
- This is a short-term trade, and I would be aiming for the 0.86 level with a stop loss at the 0.8465 level underneath.
- The euro fell significantly during the early hours on Wednesday, reaching down toward the 0.85 GBP level.
- This is an area that has been important multiple times, so it’s not overly surprising to see that we are testing this area.
- However, Thursday could be a very pivotal trading session for this currency pair, due to the fact that the European Central Bank has an interest rate decision that will obviously have a major impact on this currency pair.
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Technical Analysis
The technical analysis for this pair is pretty dire, but at this point in time it’s obvious that the 0.85 level is a massive support level and goes back multiple years. Because of this, I think the market is simply trying to kill time here, perhaps deciding whether or not the ECB not only cut its rates, but if it suggest that it’s going to cut several times in the future. If that’s the case, we could finally plunge lower, opening up the possibility of a move down to the 0.84 level.
On the other hand, if the ECB says that they are “one and done”, that could be somewhat positive for this pair, and if we can break above the 0.8540 level, and by extension the 50-Day EMA, we could see the euro try to get back to the 0.86 level, which is the top of the overall range that we had been in over the last several months.
Keep in mind that the pip value is much higher in this pair then it is most of the time in other pairs, so with that the pair doesn’t need to move as far to bring in profits, or for that matter, losses. Make sure that you keep your position size reasonable, especially if you are involved going into the ECB meeting, because the volatility should be very dangerous to say the least.
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