18.07.201918:03 Forex Analysis & Reviews: EUR/USD. July 18th. Results of the day. European Central Bank prepares to lower rates and resume QE

4-hour timeframe

The amplitude of the last 5 days (high-low): 41p – 37p – 31p – 62p – 34p.

Average amplitude over the last 5 days: 41p (47p).

From a technical point of view, the downward movement of the EUR/USD pair is absolutely logical. The price has fulfilled the critical Kijun-Sen line, and as the bulls remain extremely weak, the pendulum has outweighed the bears. It so happened that this event coincided with the hit in the media and online publications information that the ECB as well as the Fed, is preparing to reduce the key rate. The only difference is that monetary policy will be eased, most likely in September. But the European Central Bank can reduce the rate by 0.5% at once, to a historic low. Many experts believe that in July (25th), Mario Draghi will give a specific signal to the market that the rate will be lowered. Thus, at the end of his term of office, Draghi is preparing for a very decisive action regarding monetary policy. The main reason for the reduction of the key rate lies, of course, in the lower rates of economic growth and GDP, as well as in weak inflation, which is much lower than the target level of the ECB. Moreover, there is talk among traders that the ECB can go to the resumption of the QE program and will again begin to buy up assets, flooding the economy with freshly printed money. The question is, will it happen during Mario Draghi's reign or already under Christine Lagarde? Anyway, this is another factor that can put pressure on the euro in the long term. As you can see, the Fed is preparing to lower the rate, the ECB is preparing to lower the rate and resume the program of quantitative easing. The Fed will lower the rate from 2.5%, the ECB – from 0.0%. Low inflation in the EU is 1.3%, in the States – 1.6%. Wherever you throw, everywhere America feels much better than Europe, which can be a defining moment in the prospects of the euro/dollar pair.

Trading recommendations:

The EUR/USD pair completed an upward correction near the Kijun-Sen line. Thus, sales of the euro currency with targets at 1.1175 and 1.1157 are now relevant.

We recommend buying the euro/dollar pair not earlier than fixing the price above the critical line with the first target of 1.1306, but with the minimum lots, as the bulls remain extremely weak.

In addition to the technical picture should also take into account the fundamental data and the time of their release.

Explanation of illustration:

Ichimoku Indicator:

Tenkan-Sen – red line.

Kijun-Sen – blue line.

Senkou Span A – light brown dotted line.

Senkou Span B – light purple dotted line.

Chinkou Span – green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD Indicator:

A red line and a histogram with white bars in the indicator window.