Euro waits meekly for the vector of a press conference of Mario Draghi this week after the meeting of the European Central Bank, which defined as the basic and traditionally the strongest factor in the short-term for the euro. EURUSD retreated from the maximum level, as traders adjusted their positions ahead of the event. European Central Bank is expected to keep interest rates unchanged but the president President Mario Draghi is going to announce the need for ultra-soft monetary policy resuming. In March, taking a number of new tools to stimulate the union’s economy, Mario Draghi informed that he does not expect a further interest rates reduction. This is a powerful incentive for EUR purchase among investors.
Now the main challenge for the ECB is to contribute to the effectiveness of these new tools, statements and understanding that the bank can do more, if necessary. The main event of the week is a meeting of the ECB Governing Council, however, it will hardly provide a great impact to the currency market, promulgated after the quantitative easing measures taken before.
We traded EUR in 4 out of 5 transactions. We bought 2 Call binary options on the euro and 2 – Put. At the same time, EURJPY currency pair has participated in trade 2 times and we purchased Put options only for this pair. Besides it, the EURUSD and EURCAD also participated in trading. The euro trapped in a narrow corridor, so handling it was relatively easy using the basics of technical analysis.
USD Prospects Remain Difficult
US government bond yields growth helped USD to achieve 110.00 and move away from the minimum of 107.75. Expectations of the Fed basic interest hike increased. According to the level of future rates, the likelihood of the rates raising by the Fed estimated at 62% by the end of this year among traders. Late last week, the probability is estimated at only 50%. Central bank’s rate hike increase US expectations due to the rise in oil prices, which could support inflation, experts say. At the same time, investors still expect raising rates at the April meeting.
Oil prices rose strongly, reacting to the news of further declines in US crude oil production. It was drew up USDJPY pair. As the head of the Japanese central bank Haruhiko Kuroda, he would not hesitate, if it needs to increase the stimulation of the economy by monetary policy instruments. Meanwhile, he noted that monetary incentives do not guarantee the currency weakening or strengthening of the stock market. The next meeting of the Bank of Japan leadership is scheduled for April 27-28.
Despite the popularity of the US dollar in the international currency market, we bought only one Call binary option on EURUSD currency pair, thus confirming a negative outlook for the US currency. Fed’s dovish stance significantly weakens the US dollar despite the weak macroeconomic statistics from other countries.
Pound Sterling Resists Bears
Pound Sterling found support in the face of new survey among the Britons. If a referendum on Britain’s membership in the European Union held now, 52% of Britons would vote for the preservation in the EU according to Orb/Telegraph poll. For an exit from the EU countries, 43% of respondents voted. The survey conducted among 800 voters. At the same time, the results of a similar study of Orb/Telegraph, conducted in April, stated that 51% of people were among the opponents of Brexit, 44% – among the supporters. The referendum, in which the Britons will vote decide the future of the country, will take place on June 23.
An unexpected rise in popularity of pound looked a bit hasty among traders, so we decided not to include the British currency to our trading plan, as unexpected fluctuation risks were very high. The referendum in the United Kingdom is getting closer and the uncertainty increases significantly in the market.
Aussie Should Fall Until the End of the Year
At the moment, the market of derivative instruments recorded in prices only 10 percent chance of lower rates at the RBA May meeting and 70 percent probability of such a decision to the end of the year. This, as well as the current dovish position of the FOMC, supports Aussie, which last week achieved to renew multi-month highs. The recovery in commodities provokes a rise in the Aussie, according to RBA protocol, it is clear that AUD growth represents a serious threat to the Australian economy.
Australian dollar as the pound sterling has not included in our trading plan. The main growth driver of the AUD is positive dynamics of prices for iron ore, but we do not see significant opportunities for further growth of the price. Consequently, the prospects for the Australian dollar should be reviewed by traders. The main question is only when this happens.
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