A1 Trading Company

January 25, 2024

ECB Rate Statement Weakens EUR

Frank Cabibi

Today the ECB discussed interest rates going forward in regards to the impact on the economy and inflation. Here is what is why EUR is reacting the way it is and what could be in store for the currency from a demand stand point.

EdgeFinder Analysis

EURAUD is now at a +7 bullish score on the EdgeFinder, a slight tick lower than the previous days' scores of +8. The trend reading was the only category that changed as price moves lower today. The ECB decided to keep rates the same today with the anticipation of higher rates for longer.

Nothing new here but the only question that remains is how much the economy will suffer as a result of long term higher rates. The bank expects more slowing in GDP and growth over time. It does appear that rate hikes could be over for them, and the next likely move will be a rate cut at some point this or next year.

GBPNZD is still a strong bullish reading on the EdgeFinder at +11 but is now rejecting what is now a quadruple top on the 1D timeframe. If price continues to fall, it could catch support around a previous top around 2.059.

Pound was the only clear bullish reading from last week's COT report. Retail is also majority short this pair. Higher PMI numbers from the services and manufacturing sectors could be a good sign for pound optimism, however, price may be experiencing momentary pullback from hitting resistance.

A neutral score on the EU pair doesn't look very promising. However, PMI data yesterday helped shift the score away from a slight bearish reading to neutral. COT seems uninterested in both the euro and dollar from last week's report, while retail is mixed.

EURUSD is looking a bit oversold on the 1D timeframe after coming down to test a significant level of support around a double bottom in which could experience a bounce. Because of the neutral rating on the EdgeFinder, the pair may be more reliant on technical setups as we wait for PCE in the US on Friday.

Retail Spotlight

Seeing how retail is mostly short GBP and EUR, we can assume the contrarian signal which would be bullish. Meanwhile, CADCHF, USDCHF and EURCHF are the top most bought pairs from the crowd. We could also assume that these pairs are bearish.

Smart Money Spotlight

Here is the COT indicator which compares smart money and retail sentiment. It is designed to show a divergence or convergence in interest between the two parties. Ideally, traders would want to see an increase in COT net positioning and a continual decline in retail sentiment, and vice versa.

I use this to see where those patterns are happening. In the case for EURUSD, it seems that there is growing bullish sentiment from smart money and retail. However, retail is still leaning bearish while COT is bullish. The way to tell who is bearish or bullish is by checking which values are above or below 0%. Below 0% is bearish and above 0% is bullish.

Fundamental Spotlight

Unemployment claims also came out today in the US. Results were worse than expected as more jobless people were reported than last month. This led to a -1 in the Initial Jobless Claims category and a 0 for overall Labor Market Score for SPX500 (US indices).

A1 Edgefinder

AI- Generated Trading Setups
AI-generated bullish/bearish bias setups on forex currencies, gold, & indices.

Apply for a trial

Trading GBP Into PMI

Pound pairs are now a stronger bullish reading on the EdgeFinder than any other currency this week. With PMI data coming in the UK on Thursday, here is what to expect for the GBP pairs in the coming days. EdgeFinder Analysis GBPAUD is the strongest of the GBP pairs today at +7. The score increased […]

Read More
USD Ahead of PPI

Tomorrow's PPI number will be another impactful factor on investor sentiment around dollar-based assets. We have already talked about CPI's recent influence on the markets, but here is what can happen tomorrow on a beat or miss scenario. EdgeFinder Analysis AU is now at -6, one point higher than yesterday's -7 due to economic numbers […]

Read More
False Breakout on Gold?

Gold's price broke under a three-month long supportive trend line. Although the break below has the metal down almost half a percent on the day already, there is still a bullish case for the metal for a few reasons. EdgeFinder Analysis UJ is bullish at +6 going into the week. The dollar in general is […]

Read More
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
There is a significant degree of risk involved in trading securities. With respect to foreign exchange trading, there is considerable risk exposure, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.
homesmartphonelaptop-phonemenumenu-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram