When Will The ECB Raise The Benchmark Rate?
2022.06.09 12:26
The euro has been trading within the range of 1.0650/1.0750 for almost two weeks, touching one limit after another. During one day, the price may climb to the upper limit and then return to the lower one.
Even the third GDP estimate for the first quarter failed to change the situation. Notably, according to the recent data, the eurozone economic growth accelerated to 5.4% from 4.7%. The data significantly exceeded two previous estimates, which showed a rise just to 5.1%.
Eurozone GDP.
The market has stagnated ahead of the ECB meeting. Although monetary policy is likely to remain unchanged, the regulator may unveil the date of the first key interest rate hike since 2011.
Representatives of the European Central Bank have been discussing this issue out loud, and the central bank may hike rates in July. And consequently, the euro will rally and escape the sideways channel.
The possibility of an interest rate hike will boost interest in European bonds, whose yield may start rising soon. Notably, this could be the largest growth in a decade. As a result, the euro will have the momentum to rally much higher.
Eurozone key interest rate.
Technical Outlook
During the 2-week stagnation, the euro/dollar pair formed a sideways channel of 1.0636/1.0800. This, in turn, points to the accumulation process that may cause acceleration after breaking the range.
On the four-hour chart, the RSI technical indicator crossed the mid-line 50, providing a buy signal. However, the signal is variable and appears when the price rebounded from the lower limit of the range. The indicator is moving along the mid-line 50, pointing to the price stagnation on the daily chart.
EUR/USD 4-hour chart.
On the four-hour chart, the Alligator’s moving averages intersect each other numerous times, thus signaling a slowdown in the corrective movement and a possible flat. The indicator points to an uptrend on the daily chart since moving averages are headed upward. In this case, it is a residual signal spurred by the sideways channel.
The flat movement is still in force. That is why traders will likely choose the strategy based on a rebound from either limit. However, the breakout strategy is still the main one under the current conditions. A break of either limit may lead to a more extended correction or a gradual drop.
Regarding the complex indicator analysis, we see that technical indicators signal mixed opportunities in the short-term and intraday periods amid the sideways movement. In the mid-term period, the indicator signals buy since the price rebounded from the lower limit of the range.
