ECB Interest rate decision today

The ECB’s interest rate decision is set to occur later on today. The predominant market expectation, is for the ECB cut interest rates by 25 basis points, with EUR OIS currently implying  a 95.85% probability for such a scenario to occur. Therefore, our attention now turns to the bank’s accompanying statement, where should it be inferred that inflation remains stubborn and thus the bank may require a greater degree of confidence, before easing their monetary policy further then it may provide support for the EUR. On the flip side, should ECB policymakers signal future rate cuts, it could weigh on the EUR. In our view, following the higher-than-expected preliminary HICP rates for May coming in higher than expected for the Eurozone, implying an acceleration in inflationary pressures in the bloc, we would not be surprised to see some hesitancy in the bank’s accompanying statement from the ECB to aggressively cut interest rates.Over in America, the US ISM Non-Manufacturing PMI figure for May came in higher than expected at 53.8, implying an expansion in the US non-manufacturing sector of the US economy. The aforementioned release, may imply some economic resiliency from the US economy, and thus upon its release provided support for the dollar.In Canada, the BoC cut interest rates by 25 basis points, as was widely expected by market participants. Following the decision, BoC Governor Macklem in the accompanying press conference stated that “monetary policy no longer needs to be as restrictive”. The comments made by BoC Governor Macklem, could be perceived as slightly dovish in nature, as it implies that the bank may continue easing its monetary policy, which in turn could weigh on the Loonie.

On a technical level ,we note that EUR/USD appears to be moving in a sideways fashion, after breaking below our upwards moving trendline which was incepted on the 30^th of May. We maintain a sideways bias for te pair and supporting our case is the RSI  indicator below our chart which currently registers a figure near 50 implying a neutral market sentiment. For our sideways bias to continue, we would require the pair to remain confined between the 1.0864 (S1) support level and the 1.0910 (R1) resistance line. On the flip side for a bullish outlook we would require a clear break above the 1.0910 (R1) resistance line, with the next possible target for the bulls being the 1.0980 (R2) resistance level. Lastly, for a bearish outlook we would require a clear break below the 1.0864 (S1) support line with the next possible target for the bears being the 1.0795 (S2) support level

WTICash appears to be moving in a downwards fashion. We maintain a bearish outlook for the commodity and supporting our case is the RSI indicator below our chart which currently registers a figure below 40, implying a bearish market sentiment. For our bearish outlook to continue, we would require a break below the 71.50 (S1) support level, with the next possible target for the bears being the 66.95 (S2) support base. On the flip side for a bullish outlook, we would require a clear break above the 76.55 (R1) resistance line with the next possible target for the bulls being the 81.80 (R2) resistance level. Lastly, for a sideways bias, we would require the commodity to remain confined between the 71.50 (S1) support level and the 76.55 (R1) resistance line.

Other highlights for the day:

Today in the European session, we get Eurozone’s and the UK’s construction PMI figures for May and Eurozone’s Retail sales for April, while later on we highlight the release of ECB’s interest rate decision. In the American session, we get the weekly US initial jobless claims figure and Canada’s trade data for April, while on the fiscal front, we note that US Treasury Secretary Yellen is scheduled to speak. In tomorrow’s Asian session, we get Japan’s all household spending for April and China’s trade data for May, while on the monetary front, RBA’s Deputy Governor Hauser speaks. 

EUR/USD H4 Chart

• Support: 1.0864 (S1), 1.0795 (S2), 1.0727 (S3)
• Resistance: 1.0910 (R1), 1.0980 (R2), 1.1047 (R3)

WTICash Daily Chart

• Support: 71.50 (S1), 66.95 (S2), 61.76 (S3)
• Resistance: 76.55 (R1), 81.80 (R2), 85.85 (R3)

If you have any general queries or comments relating to this article please send an email directly to our Research team at research_team@ironfx.com

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