24.04.201823:49 Forex Analysis & Reviews: April meeting of the ECB: Will Draghi repeat the "Washington speech"?

The euro/dollar pair halted its decline, taking a new price range of 1.2190-1.2280. Despite the relatively strong downward momentum, the bears of the EUR/USD pair celebrate the final victory early: on the daily chart, the price has not yet broken the bottom line of the Bollinger Bands indicator, so the upward trend has not lost its relevance. In this context, the meeting of European Central Bank tomorrow will play a decisive role. ECB President Mario Draghi will either permanently weaken the position of the euro, or willy-nilly "give a helping hand", and optimistically assess the current state of the eurozone economy.

Last Friday, the head of the ECB spoke in Washington, where he gave a rather "dovish" sounding rhetoric. First, he acknowledged the obvious fact of a slowdown of growth in Europe. Secondly, he allowed the probability that the EU's economic growth cycle reached its highest point last year. In addition, Mario Draghi associated these negative trends with the problems of the world economy, complaining about the protectionism and volatility of financial markets. Behind the screen of diplomatically verified streamlined phrases there was an obvious subtext: in fact, the head of the European regulator condemned the actions of Donald Trump in the sector of foreign trade. In other words, Mario Dargi put the issue of global trade conflicts on the first place in the list of possible risks.

It is worth noting that this position Draghi was voiced on the evening of an important event: April 27, Donald Trump will meet with German Chancellor Angela Merkel. Relations between the US and Germany are now being tested for strength: the American president follows the principle of "America First", while the Germans are trying to curb unpredictable policies. So far, the White House is limited to threats or half measures. For example, at the beginning of spring, Trump threatened the introduction of new duties on the import of cars from Germany, but this issue remained open until now. As with the raw material issue: in March, Donald Trump introduced duties on the import of steel and aluminum, but European countries immediately fell into the "white list" of beneficiaries. It should be noted that the validity of tax benefits expires on May 1, so their prolongation will depend on the outcome of the meeting of the leaders of the United States and Germany.

Given this factor, Mario Draghi can repeat his main theses of the "Washington speech" tomorrow, taking a cautious and wait-and-see attitude. In general, the market does not expect any action or decisions from the ECB. The main question is the tone of the Draghi's rhetoric at the press conference: excessive pessimism or prevailing optimism will decide the fate of the euro - at least in the medium term. Based on the result of tomorrow's meeting, the market will decide when the European Central Bank will be able to announce the deadline for completion of the QE - in June or in September.

It is noteworthy that at the end of last week US news agencies, citing anonymous sources, published very interesting but contradictory information. According to one information, the negative dynamics of the beginning of this year will not affect the resolve of the ECB members: the stimulating program will be completed in the fall, as it was planned earlier. However, according to other journalists, the situation is the opposite - the central bank will not (at least until July) make (and make) any decisions regarding QE, observing the further dynamics of European inflation and other key indicators. Contradictory insiders mislead traders, so the intrigue of tomorrow's meeting only increased.

It is worth noting that the optimistic scenario of the April scenario is not out of the question. Speaking in Washington, Mario Draghi repeatedly expressed his confidence that the growth potential of the European economy is not exhausted, and investments continue to show positive dynamics, exceeding ten-year highs.

Thus, the balance can swing tomorrow both towards the strengthening of the euro, and in the opposite direction. The likelihood of the "dovish" mood of the ECB is very high, given the recent macroeconomic indicators and the statement of Draghi in Washington. In my opinion, the market is more prepared for the soft rhetoric of "Super-Mario", so the implementation of this scenario will have a mediocre pressure on the euro/dollar pair: the price will fall in the area of the 20th figure. To push to the 20th level, bear pairs need more compelling arguments - for example, the news about a possible prolongation of the QE programme.

On the other hand, if Draghi remains optimistic (thereby hinting at the completion of QE in the fall), the euro will receive a strong impetus for its growth. In pairing with the dollar, the first target of the upward movement will be the mark of 1.2345 (the upper limit of the Kumo cloud on the daily chart). This scenario is unlikely, but it is for this reason that the effect of its implementation will be much stronger.