EUR/USD Volatility Expected on ECB Presser, US GDP

EURUSD ECB Volatility Ahead: Our AUD/USD and USD/CAD profit targets were reached during Wednesday’s volatility. However, for the remaining of the week, the market participants will shift their focus to the EUR crosses. EURUSD ECB volatility is expected to ramp up on Thursday, and to continue well into Friday as the US releases their Gross Domestic Product. Here is the IDDA approach to strategy development for the EUR/USD pair, for those who are looking to take advantage of the high-risk events to earn some pips.

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EURUSD ECB Volatility Ahead – IDDA Analysis

Technical Points: The first point of the IDDA focuses on technical analysis. The EUR/USD pair has been bouncing up and down inside the daily Ichimoku cloud since the beginning of October. The future cloud remains flat. The supporting pivot is set at the lower band of the Ichimoku cloud and the 78% Fibonacci retracement level of 1.1724. First resistance is setup narrowly at 1.1868

EURUSD ECB Volatility Ahead – Daily Time Frame Technical Analysis

While the market appeared to gear up for more bullish sentiment in Wednesday, we still do not have a concrete bullish or bearish signal on the daily time frame.

Fundamental Points: The second point of the IDDA focuses on fundamental analysis. The main market movers for EURUSD this week would be ECB’s rate decision on Wednesday, and the US GDP data on Friday.

EU side: European Central Bank monetary policy and Rate Decision is scheduled at 11:45 AM GMT during Thursday’s London session. ECB Governing Council meeting will be shortly thereafter, at 12:30 PM.

The central bank is expected to keep rates unchanged, while expected to hint at future tightening. Analysts are not expecting the ECB to talk down the EUR. However, there’s no guarantee that ECB’s president, Mario Draghi won’t try to jawbone the euro,

In terms of quantitative easing, earlier in October Bloomberg cited unnamed ECB officials, supposedly favor extending the ECB’s QE program by nine months, but at a tapered pace of €30 billion per month, which is half the current monthly purchase amount.

More on the economic calendar…  German Retail Sales data (SEP) coming up on Friday during the London session, as well as ECB Survey of Professional Forecasters at 8 AM GMT. 

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US Side: Also on Thursday at 12:30 PM GMT, the US will release their weekly jobs report and Advance Goods Trade Balance. The combination of this with the ECB presser could already create a rollercoaster ride for the EUR/USD pair on Thursday. 

Then, just to add to the fun, the US will release their GDP data on Friday at 12:30 PM GMT.  This could set the tone for Friday’s New York session, and perhaps even Monday’s market open.

The US Gross Domestic Product is expected to have shrunk in Q3 on an annual basis, from the previous reading of 3.1% to 2.5%. Being the most comprehensive overall measure of economic output, a worse than expected reading could send the USD to the south versus major counterparts, while a better than expected reading could strengthen the Greenback. U. of Michigan Confidence will be next at 2 PM, followed by Baker Hughes U.S. Rig Count at 5 PM to end the trading week. A better than expected result could push the EUR/USD pair lower.

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Sentimental Analysis: The third point of the IDDA focuses on market sentiment. With the EURUSD ECB volatility ahead, Retail trader data shows 42.2% of traders are net-long the pair. However, traders are less net-short than yesterday and compared with last week. 

We typically take a contrarian view to crowd sentiment. So, recent changes in sentiment warn that the current EURUSD price trend may soon reverse lower despite the fact traders remain net-short.

Trading Strategy: As the 4th point of the IDDA, you must calculate your risk tolerance before deciding on the investment strategy that is suitable for your portfolio. Join us for a free MasterClass to learn more.

Here are Invest Diva’s calculations for important approximate levels for EUR/USD to watch out for.

1.1868

As an Invest Diva you should be able to put the 3 and 4 together and develop a strategy suitable for your portfolio and risk tolerance at this time. For further help, and if you want to chat with me regarding your trades, join our investing group here. It’s awesome!!