Hello, dear colleagues!
The main events of today will be the decision of the European Central Bank (ECB) on interest rates, which will be announced at 12:45 (London time), as well as a press conference of ECB President Christine Lagarde, which will begin at 13:30 London time.
The main interest rate is expected to remain at zero, however, the deposit rate may be reduced by 10 basis points. At least this assumption is put forward by the analytical departments of several major global commercial banks. It is also possible that the European Central Bank, in connection with the COVID-19 pandemic, will increase the volume of its bond-buying program by 250 billion euros. Let me remind you that PEPP currently stands at 750 billion euros. Of course, these events will directly affect the price dynamics of the main currency pair. Reducing the deposit rate by 10 bps, as well as increasing the purchase of bonds by 250 billion euros, will be perceived by market participants as steps to restore the Eurozone economy from the consequences of COVID-19, and may support the single European currency.
However, the European Union has an Italian problem. Italians were extremely dissatisfied because, at the height of the coronavirus epidemic, they were almost turned away by all their fellow EU members, and the head of the ECB, Ms. Lagarde, instead of much-needed financial assistance and support, directly stated that the coronavirus is a problem for Italians themselves. That is, let them sort it out for themselves, it does not concern us. It is highly cynical. And this at the height of COVID-19, when hospitals in Italy were overflowing and the daily death rate was appalling in its figures!
In this regard, the political movement Italia Libera has submitted to the Supreme Court of Cassation a draft law on holding a referendum on the withdrawal of Italy and the European Union. Now, in order for the country's parliament to consider this proposal, it is necessary to collect 50,000 signatures. More than sure - it's not a problem. We would have collected many times more signatures, since the Italians, in the light of recent events, are finally convinced that membership in the EU is based only on the financial component. Mutual assistance and support in Brussels are remembered only when the situation escalates to the limit and threatens the probability of the collapse of the European Union. I dare say that if Italy continues to move towards leaving the EU and the Eurozone, it will immediately begin to offer large financial tranches, and on the most favorable terms. This has happened many times in recent history. Just remember the Greek epic.
In my personal opinion, significant changes are needed for the future viability of the European Union, but this is a topic for a separate article. And now it's time to move on to the technical picture of the main currency pair of the Forex market.
Daily
At yesterday's trading, the EUR/USD pair continued to grow, which in its duration can be compared with December 2013. The pair ended the trading session on June 3 at 1.1232, while the maximum values were shown at 1.1257. Thus, the expected target of possible growth in the area of 1.1200-1.1235 was reached yesterday, but the euro bulls failed to close the day above 1.1235 yesterday.
At the end of this article, the euro/dollar is trading with a slight decrease, near 1.1208. In fact, there is no doubt that today's events will have a significant impact on the movement of the quote, but it will be determined during the speech of the head of the ECB. On the technical side, a pullback to the price area of 1.1195-1.1145 is quite possible, after which the euro/dollar pair may resume its upward momentum. I will note that in the selected area there are several broken resistance levels, which have not yet had a corrective pullback on the daily timeframe.
H4
On the four-hour chart, after the breakdown of the strong resistance zone of 1.144-1.153, a clear pullback was given to the last mark, after which the quote turned towards the breakdown, that is, in the north direction.
However, last night there was a reversal model of candle analysis "tombstone". As you can see, after the appearance of the highlighted candle, the pair moved to a decline, which at the moment can be considered corrective. At the same time, do not forget about an additional signal for a likely decline - the bearish divergence of the MACD indicator.
H1
The hourly chart shows a similar pattern. In the area of 1.1235-1.1257, a candle with a very long upper shadow appeared, which is much larger than the bullish body itself. In addition, the MACD bearish diver remains on the hour.
I venture to assume that the current decline will continue, and its targets will be the levels 1.1197, 1.1165, 1.1150, and possibly 1.1145. Near these marks, the pair can turn around and resume its bullish direction.
Given today's events, it is not easy to assume the price dynamics of the instrument and how the auction will take place. Much will depend on the ECB's decision and, especially, on the rhetoric of Christine Lagarde, whose press conference will begin at 13:30 (London time).
If we abstract from these events and rely solely on technology, the exchange rate is adjusted to its previous strong strengthening, after which the Euro/dollar is likely to move to growth and resume strengthening.
Trading recommendations for EUR/USD:
We consider purchases after a decline to 1.1197, 1.1165 and 1.1150. Bullish models of Japanese candlesticks on 4-hour and (or) hourly timeframes will be the confirmation for opening long positions on the pair.
It's too late to sell right here and now. If the pair tries to break above the current resistance zone of 1.1235-1.1257 again and this attempt is unsuccessful, then after the appearance of reversal patterns of candle analysis, we sell with the nearest goals in the area of 1.1170-1.1150.
In conclusion, I will once again emphasize the importance of today for the EUR/USD currency pair. However, tomorrow's trading will have no less impact on the results of the weekly session when data on the US labor market will be published.
Good luck!