News Trading Strategy On EURUSD – ECB

Article by Investazor.com

An interesting fact is that one of the most intense trading sessions for EURUSD in terms of market volatility occurs on the day the European Central Bank has its official Press Conference. 100 pips movements are very usual on these occasions, so it will be very important to know how to make the most of it and take advantage of that huge volatility. This is why I am going to take it from scratch and explain how to approach the ECB Press Conference and how to adapt your trading strategies.

In the first Thursday of every month at 15:45 GMT, ECB announces its rate decision, which is the interest rate on the main refinancing operation that provide the majority of liquidity to the banking system. This event tends to be overshadowed by the ECB Press Conference held 45 minutes later as the rate decision is often priced in the market. The usual effect is the following, an actual value higher than the forecast is good for the EUR.

As an example, right now the rate is 0.25%. If ECB decides to raise the rate to 0.5%, this means investors will pay a higher price in order to borrow money, so the currency will be more expensive to have and the effect will be the appreciation of the EUR vis-à-vis the US dollar. Vice versa, if the rate drops, EUR will be cheaper to have in possession, so EURUSD fall as US dollar will be regarded as being stronger than the EUR.

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