25.10.201807:56 Forex Analysis & Reviews: Global macro overview for 25/10/2018

The Euro currency is trading calmly and the market seems to be immune to information about Italy. The market is waiting for the ECB meeting and will be looking for an answer to the question of whether recent turbulence would be sufficient to affect the prospects of monetary policy. The confusion over plans to increase the budget deficit next year translates into an increase in credit risk and the sale of Italian bonds, putting into question the future stability of the system. The difference in the profitability of the Italian and German 10-year-olds exceeded 3 percent points and is the highest in five years. It is unlikely that the ECB intends to take measures to stabilize the debt market and many times in the comments the members of the Governing Council pointed out that the problem of Italy is isolated and you can not see the so-called effect of infecting other markets. At the same time, it would be prudent to stop all future strategy decisions that could suggest a departure from accommodative monetary policy. This means postponing the formal decision to end the QE program at the last minute, ie the December meeting. In the broader horizon, we remain positive towards the euro prospects. The issue of public finances of Italy is a type of ballast that can slow down, delay the appreciation of the single currency, but it is not enough to prevent it.

The ECB Interest Rate decision is scheduled for 12:45 pm GMT and the market participants expect the rate to be left unchanged at the level of 0.00%. No change is expected to Deposit Facility Rate (-0.40) and Marginal Lending Facility ( 0.25%). The ECB Press Conference event is scheduled at 13:30 pm GMT.

Let's now take a look at the EUR/USD technical picture at the H4 time frame before the ECB decision is made public. The area between the levels of 1.1432 - 1.1444 will now act as a resistance zone. The next important technical support is seen at the level of the 1.1354 - 1.1347 zone, but please notice the growing bullish divergence between the price and the momentum oscillator in oversold market conditions. The bulls are weak, so the market might try to test the lower range of prices and the trigger for this move might be the macro event like the ECB rate decision and the following press conference with Mario Draghi. Please keep an eye on the price behavior as the volatility will increase during this event.