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Perhaps never before have we seen a scenario where, following a 60 basis point cut in the refinancing rate, the currency issued by the central bank making such a significant move actually rises. But that's precisely what happened yesterday. After the European Central Bank lowered the interest rate from 4.25% to 3.65%, the single currency didn't even consider a decline. On the contrary, it grew quite confidently. And this was the largest single cut in the refinancing rate in the entire history of the ECB. While it's now listed in virtually every economic calendar that this outcome was predicted, that's not entirely accurate. Right before the meeting, forecasts were pointing to a rate of 4.00%. That was changed almost after the fact. So, this large cut was an outright surprise. This raises the question of why the euro continued to rise afterward. The answer lies in the comments made by ECB President Christine Lagarde. During her press conference, she explicitly stated that the ECB is putting the monetary policy easing process on hold. In other words, no more rate cuts for now. The market, however, had expected this process to be drawn out over a more extended period. Now, the Federal Reserve will be lowering interest rates, not the ECB. This shift in expectations likely spurred the euro's rise.
However, interest rates in the United States are still significantly higher than those in Europe, which is unlikely to change. The only question is the size of the interest rate disparity. This fact will continue to put pressure on the euro. Once the market recovers from the initial shock, the dollar will likely resume steadily strengthening its position.
The speculative rise of the euro led to its strengthening by more than 80 pips, indicating once again the end of the corrective cycle. Currently, the support level is 1.1000, around which the recovery process occurs.
In the four-hour chart, the RSI technical indicator moves within the buyers' area of 50/70, indicating an upward sentiment among market participants.
Regarding the Alligator indicator in the same time frame, the moving average lines have changed direction from the bottom to the top, which aligns with the price movement.
Considering the increasing overbought condition of the euro in the short-term time frames, the recent impulsive growth could theoretically overheat long positions. However, based on the euro's ongoing recovery, only 50% of the corrective scale has been covered, which suggests the possibility of further upward momentum. If the price stabilizes above 1.1100, there could be a movement towards 1.1150, where it will become clear how strong the sellers of the US dollar are.
The complex indicator analysis indicates an upward cycle in the short-term, intraday, and medium-term periods.
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