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Euro Develops Corrective Trading Dynamics

9/9/2022 2:02 PM

The European currency shows fairly active growth, testing the level of 1.0075 for a breakout and updating local highs from August 26. The main factor in strengthening the positions of the instrument at the moment is the decision of the European Central Bank (ECB) on a record increase in interest rates, adopted the day before.

The regulator decided to correct the value immediately by 75 basis points, bringing the final level to 1.25%. The deposit rate also rose by 75 basis points to 0.75%. In the follow-up statement, ECB representatives noted their readiness to further tighten monetary conditions if inflation rises or the pace of its decline is too slow. The forecast for Gross Domestic Product (GDP) has been revised down, but at the same time, the regulator does not expect an early recession. In 2022, the ECB predicts GDP growth of 3.1%, in 2023 it may grow by 0.9% and in 2024 it may increase by 2.3%, while inflation may return to the target level of 2.0% only by the end of 2024.

Additional support for the single currency is also provided by some improvements in the energy sector. Gas prices show a rather active decline, reacting to the restrictive consumption measures that the EU countries are forced to take. Also, the market is widely discussing the prospect of introducing marginal prices for Russian energy resources.

Bollinger Bands in D1 chart demonstrate flat dynamics. The price range is slightly expanding from above but it fails to conform to the development of "bullish" sentiments at the moment. MACD grows, preserving a stable buy signal (located above the signal line). Stochastic keeps its upward direction but is rapidly approaching its highs, which reflects the risks of overbought EUR in the ultra-short term.

Resistance levels: 1.0100, 1.0150, 1.0200, 1.0253. | Support levels: 1.0050, 1.0000, 0.9950, 0.9900.

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