Comentário Diário | 12/09/2019

ECB Interest rate decision

Today during the late European session (11:45, GMT) ECB’s interest rate decision is due out and the bank is widely expected to cut the deposit rate by 10 basis points, as EUROIS imply that the market has fully priced in such a scenario. However, the possibility for the bank to take more drastic measures should not be ruled out, providing a deeper cut of 20 bp. Also, a restart of the bank’s QE program could be in the schedule for the decision, so that the overall support for the area’s economy is magnified. Some analysts trend to point out also the possibility of tiering system and a possible repricing of the bank’ s TLTROs. Recent comments made by Christine Lagarde, which is to succeed Mario Draghi as head of the ECB, were clearly hinting towards a dovish stance. On the flip side it should be noted that some ECB policymakers such as BuBa president Weidman and ECB’s Lautenschlager could find an aggressive support package as an overreaction and try to moderate it somewhat. In every case the decision is not to be taken lightly, is expected to be complex and given the degree of uncertainty it entails currently could move the EUR. Also please be advised that Mario Draghi’s press conference later on, could maintain volatility for EUR pairs. EUR/USD dropped yesterday testing the 1.1000 (S1) support line, however proving unable to break it. We expect the pair to come under substantial volatility as the ECB announces its interest rate decision, which could sway the pair’s movement in any direction, depending on the content of the decision. Should the bears be in charge of the pair’s price action, we could see it breaking the 1.1000 (S1) support line and aim for the 1.0950 (S2) support level. Should the bulls take over, we could see EUR/USD breaking the 1.1050 (R1) resistance line and aim for the 1.1100 (R2) resistance level.

JPY continues to fall as US-Sino tensions continue to thaw

JPY continued to weaken against the USD yesterday as the US-Sino tensions seem to continue to thaw away and a risk on mood returns to the markets. It would be indicative that the US President tweeted that new US sanctions are to be delayed by two weeks and commence on the 15th of October. Despite there being no real change in the US foreign policy, the delay could be considered as of conciliatory nature. It should be noted that China had announced earlier that a basket of US goods would be exempted from Chinese tariffs. Both concessions increased the easing of trade tensions, causing safe haven outflows for the Yen, which was also supported by weak financial data for JPY. Should the easing of the trade tensions between the two largest economies continue, we could see the Yen weakening further. USD/JPY continued to rise yesterday breaking the 107.75 (S1) resistance line, now turned to support. As the upward trendline incepted since the 4th of September, remains intact, we maintain our bullish outlook for the pair. Should the pair find fresh buying orders along its path, we could see the pair breaking the 108.35 (R1) resistance line and aim for the 108.90 (R2) resistance hurdle. Should the pair come under the selling interest of the market, we could see the pair breaking the prementioned upward trendline, the 107.75 (S1) support line and aim for the 107.20 (S2) support barrier.

Other economic highlights today and early tomorrow

In today’s European session, we get Germanys’ and France’s final HICP rates for August, as well as Eurozone industrial production growth rate for July. It should be noted that before ECB’s interest rate decision, we get from Turkey CBRT’s interest rate decision which is expected to cut rates as well today. During the American session, we get the US inflation rates for August and during the Asian session tomorrow we get Japan’s final rate of the industrial production growth rate for July.

USD/JPY H4

• Support: 107.75 (S1), 107.20 (S2), 106.60 (S3)
•Resistance: 108.35 (R1), 108.90 (R2), 109.60 (R3)

EUR/USD H4

• Support: 1.1000 (S1), 1.0950 (S2), 1.0910 (S3)
•Resistance: 1.1050 (R1), 1.1100 (R2), 1.1150 (R3)