ECB announces the start of "no tapering, but recalibration"
Yesterday, the session was focused on the European Central Bank (ECB) meeting and subsequent press conference by its president Christine Lagarde - in which we witnessed a verbal balancing act to announce the start of stimulus tapering, but without tapering.
Specifically, the ECB announced its intention to recalibrate (or taper) its Pandemic Purchase Programme (PEPP) in the last quarter of the year, after this programme was raised to 80 billion euros per month at the beginning of 2021. For the moment, the ECB has not given any clue as to the amount of this reduction in the asset purchase programme, but it is estimated that it will be between 60 and 70 billion euros in the coming months.
During the subsequent press conference, Christine Lagarde tried to present an optimistic message regarding the future of the economy, after the upward revision of the Eurozone's growth forecasts for 2021 from 4.6% to 5%, insisting once again that rising inflation will be transitory.
The ECB did not deviate from the script expected by the market and, once again, it is in line with the message sent by the US Federal Reserve. Therefore, we will have pay close attention to the outcome of the next meetings in November and December to obtain more information regarding the reduction of monetary stimuli.
If we focus on the financial markets, we can see that at the beginning of yesterday's session the main European indices fell across the board. However, after the ECB’s press conference these declines eased and recovered much of the lost ground, continuing today with rises in the main stock market indices once the session opened.
After the declines of Monday, Tuesday and Wednesday's sessions, during yesterday's session the EURUSD received the words of Christine Lagarde with optimism. The currency pair managed to form a rebound in its 18-session moving average in white that has continued during today's session and is leading it to face its important support/resistance level represented by the orange band.
If we look at the daily chart, we can see that, last Friday, the price started a bearish movement after facing its 200-session moving average in red and the high level of last July represented by the green band - where the price seems to have made a triple top formation.
It is very important to follow the evolution of the price over the next few sessions, as a failure to recover these important resistance levels could confirm this triple top and trigger a strong bearish momentum that could take the price to the lows of last August or even to the lower red band, which acts as its main support level.
As long as the price fails to break through this triple top the sentiment will remain negative for this pair, although a break above it would open the door to a strong bullish momentum.
Evolution of the last five years:
- 2020 = +8.93%
- 2019 = -2.21%
- 2018 = -4.47%
- 2017 = +14.09%
- 2016 = -3.21%
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