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8 May Forex daily review

Sergiy Zlyvko
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On Thursday, the Bank of England and the ECB left its monetary policy unchanged. Monetary Policy Committee of the Bank of England kept interest rates at 0.5% and the volume of purchases of assets in the amount of 375 billion pounds. The Governing Council of the ECB kept its benchmark interest rate unchanged at 0.25%.

EURUSD began to rise before the announcement of the ECB decision and press conference of Mario Draghi. After the announcement of the decision, the strengthening of the euro continued and intensified with the start of Draghi’s press conference. EURUSD rose to 1.3990 mark. The pair has not held 10 points to 1.4000. Our target was in the zone below the level of 1.3980. Bulls did not trade at 1.4000 for a long time. Mario Draghi in his statement about euro rate and inflation helped EURUSD to achieve 1.3870 mark and further to the end of the day the pair has slipped to 1.3835. The dollar index rebounded from a low of 78.90 to 79.45.

Mario Draghi criticized the strong euro and its impact on inflation and the economy of the Eurozone. According to him, the ECB is ready to act. Most likely, the easing of monetary policy should be expected at the next meeting.

What to expect from Friday? Yesterday EURUSD and USDCHF reversed, but they did not brake dollar’s bearish trend. On dollar index we expect a correction to yesterday’s growth today. For the continued growth of the dollar, a rollback to 79.30 would be sufficient. Fall to 79.20 may return the index to 78.90. Please be vigilant. The return rate must be regarded as an opportunity to close short dollar positions.

When the euro strengthened, British pound could not grow due to the growth of EURGBP cross-rate. When EURUSD and EURGBP turned down, GBPUSD traded at 1.6955 and failed to grow alone amid rising dollar against the euro and Swiss franc. As a result, EURUSD fell to 1.3830 mark (including Asian session), GBPUSD fell to 1.6020.

Traders should fear yesterday’s model. If the bowl is formed (a gentle turn up), there are risks to go back to 1.4000 for 2 trading days. There is another pricing model in which EURUSD may go back to 1.4000, but it is too early to say about it.

If there will be a correction of EURGBP cross-rate, the pound minimum will be updated. And we are considering a rollback to moving average. Weekly candle does not threaten the bulls, but on dips towards 1.6890, bulls situation will become falter. Weekly trend line passes through 1.6775. Weekly stochastic generates a signal to sell the pound. We should not have to buy a pound at this location stochastic. Now we have to use the growth in order to dump long positions on time.

AUDUSD exchange rate updated a maximum of 0.9400 and it is currently trading at 0.9370 against lowest point at 0.9345. Bears break through the trend line, but we’re inclined to think that from moving average the rate should return to 0.9380 and then begin a new decline below 0.9345.

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