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

All-In-One Fundamental Dashboard!
Simplify your fundamental analysis with our all-in-one fundamental dashboard! 
Discount code: READER

Learn more

Hotter CPI Shakes Markets

Yesterday's CPI numbers in the US caused considerable doubt in the expectations of a June rate cut. This morning's PPI came in lower than expected. But, it might not be enough to convince investors of a summer rate cut. EdgeFinder Analysis EURUSD is a -8 now on the EdgeFinder indicating dollar strength after the higher […]

Read More
Key Inflation Data Weighs on Investor Sentiment

Wednesday's inflation report in the US will be very pivotal in how USD-related assets will react for the next month. Higher CPI has investors worried of the Fed who still looks to cut rates at some point this year, but the inflationary trend could determine when these rate cuts come. EdgeFinder Analysis We have been […]

Read More
PMI Pushes Higher into Expansion

This morning's ISM Manufacturing PMI data came in higher than expected this month at 50.3. Here is what investors might be thinking in regards of the latest numbers, and why this could be bearish for the dollar. EdgeFinder Analysis USOil's score drops at the start of this month as the seasonality on the 10-year average […]

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
Home
Edgefinder
Signals
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