By IFCMarkets

New ECB forecast may weaken Euro
The European Central Bank is anticipating the economic slowdown in eurozone and the lower inflation. Due to that it is planning to elongate its bond buying program, extend the number of instruments and expand the monetary emission. How will the Euro react? Let’s consider opening the short position.

The ECB revised down its economic forecast in eurozone on Friday which may stimulate the single currency weakening against the US Dollar. By the way, the ECB has downgraded the eurozone economic growth in its June’s report from 1,5% to 1,4% for this year. Next year the GDP growth of 1,7% is expected and of 1,8% in 2017. At the same time, the expected inflation has been revised down from 0,3% to 0,1% this year, from 1,5% to 1,1% in 2016 and from 1,8% to 1,7% in 2017. The revision was caused by the plummeted world market oil prices and the difficulties experienced by the Chinese economy. The ECB admits the current ABS-buying program of 1,1 trn. Euros may be elongated even after September 2016, the date when the program was to be ended. At the same time, the list of the buying out bonds may be extended. In fact, the ECB is planning to acquire the Irish and the Dutch bonds totaling 645 mln. Euros.

On the daily timeframe the EURUSD:D1 began to look down within the mid-term neutral trend and fell below the 200-day moving average. The Bollinger Bands have widened which may signify the higher volatility. The MACD and Parabolic indicators give the sell signals. The RSI is below the level of 50 but is still far from the oversold zone. The bearish trend is possible if the Euro surpasses the two last lower fractals. In this case, the level of 1.101 can be considered for opening the position. The initial risk limit may be placed above the 200-day moving average and above the last upper fractal at the level of 1.133. Having opened the delayed order we move the stop following the Bollinger and Parabolic signals every 4 hours to the next fractal high. Thus, we are changing the probable profit/loss ratio in our favour. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level of 1.133 without reaching the order of 1.101, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

Market Analysis provided by IFCMarkets