Good morning traders!
The ECB is expected to announce further easing measures to boost the economy as deflation still looms. Estimates of inflation came in at 0.1 percent, lower than the forecasted 0.2 percent. The core reading excluding energy and food also disappointed with a 0.9 percent versus an expected 1.1 percent. Super Mario has pledged to do what “he must” and additional measures (if any) will be announced today.
Thanks to various reports I have read, I can summarise today into three main scenarios and options for Super Mario and the team. (12:45GMT for interest rate and I think 13:30GMT for the press conference):
1) Do nothing. The ECB has not been the most proactive of central banks, perhaps because the union is formed by 19 nations and the final decision can take time. There may be some decision paralysis, although it has to be noted that the biggest voice against further QE, Bundesbank Governor Jens Weidmann, has not been quite as vocal lately.
2) The Full Monty. The ECB has three tools it can use to stimulate the European economy. It can lower the discount rate deeper into negative territory, extend the timeline of the current bond-buying program and finally increase the amount of the program. There is a possibility the ECB will use all the tools at its disposal on Thursday.
3) A Mixture. Given the commitment that ECB President Draghi has expressed in his latest interviews and press conferences action is expected from the ECB. The exact mix of monetary policy actions is up for debate, as some of the tools would require internal rules to be modified.
I think there is not much point analysing the technical patterns in great detail today, because the outcome of this meeting can override everything and provide the new fundamental direction. I am Bullish, I am expecting there to be a further rate cut and an expansion of the asset purchase programme. But that’s just my opinion and I might be wrong.
Also, I need some willing volunteers for providing content for the daily reports. If anyone is interesting in contributing as an analyst, please let me know. Running this website on my own with two other jobs and being in a band and trying to keep a girlfriend happy is demanding and staying up until 1:30am every night is not healthy. My thoughts are to feature the analysis of a couple of volunteers every week to provide content for the daily article (perhaps for a Tuesday and a Thursday article) to share the workload. Any takers?
This morning I woke up to a 3% swing on my account equity as my Dax swing trade went from -175 points to now +15 and my two EURUSD trades equally gained. So that was a nice surprise.
The current daily candle is looking aggressively bullish, already catching up with yesterday’s candle but as I type this message we have reached the 61.8% fib of the recent swing and I wonder if we react here or just push on through and continue higher. We are above the 34 period hourly EMA and approaching the 11,330 could be a good level to watch as a bear.
For today, my advice would be don’t trade! Get out of your trades and wait, speculating on the decision and hoping for an outcome could work, but will also likely cause your blood pressure to rise too high. The potential volatility for today is huge! Am I going to take my own advice? Probably not.
Dax Support & Resistance
|200 Day SMA||10705|