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ECB’s Interest Rate Decision on Thursday. Will It Help the Euro?

Jul 24 2019, 10:25 PM (BDT) |

We think that the answer to the question we raised in the title is NO! According to the forecast, the central bank will leave the interest rate at the same level, 0 . This is why the most important thing here is to listen to the so-called verbal interventions. It is highly likely that the European officials will confirm their position about further stimulations. We think that this reaction is already in the price. 

On Wednesday the US real estate statistics were published. New home sales were released for June. The result was worse than the forecast (+646K against the expectations +660K) but still better than the previous fact +604K. 

Picture 1. The US new residential sales

Thus, there are positive factors for Thursday’s Durable goods orders to rise too. 

The US national GDP for the second quarter is published on Friday. This is only the preliminary data. The forecast is +1,8%. Here we would like to pay your attention to several main factors: the US consumption in the second quarter was rising – retail sales were growing in May and in June; as we have already seen the situation on the real estate market is quite stable. The negative factor here is Manufacturing PMI – according to Markit it dropped lower 51 and reached 50,6 in June. ISM Manufacturing PMI is decreasing as well.

Picture 2. ISM manufacturing PMI

The US trade balance deficit is increasing. 

Summary: we expect to see national GDP at less than 3%. 

Technical analysis of EUR/USD

As we have already said – after reaching the level 1.12000 we saw a short movement back up to the local red trend line. But bulls didn’t succeed in their attack - the main downtrend is still dominating. 

The main target for the price is now 1.11100 (the price has already touched this line several times before). 

We expect that bulls may start advancing again. Indicators are giving hints about future possible reversals. Thus Williams %R is returning back from its overbought zone and we see a slight divergence between the price and MACD histogram. 

Results: it’s better to think of longs if the price breaks 9-EMA up and the moving average is now at 1.12000. 

Picture 3 EUR/USD. 1D TF.

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