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EUR/USD Technical Analysis: Anticipation of ECB Decisions

During yesterday's trading, the euro's exchange rates fell sharply amid new concerns about the banking system in the eurozone, which may mean that the European Central Bank abandons raising interest rates by 50 basis points today, Thursday. The price of the euro currency pair fell against the US dollar, EUR/USD, to the support level of 1.0516, after strong gains this week, reaching the resistance level of 1.0760, after the collapse of a number of global central banks.

Adding to the euro's losses, trading in the shares of Credit Suisse, Societe Generale, and many shares of Italian banks was halted due to heavy losses. The declines raise concerns that the rapid pace of increases in global interest rates is hurting the financial sector in the eurozone. According to trading, BNP Paribas shares declined by 11.5 percent, Societe Generale shares decreased by 11.1 percent, Commerzbank shares decreased by 9.5 percent, and Deutsche Bank shares decreased by 8.1 percent.

Commenting on this, Fouad Razakzadeh, an analyst at City Index, says: “Investors were panicking. A bloodbath, if you will.” And “This follows a broader industry sell-off in the wake of the Silicon Valley bank collapse. Concerns about other financial crises, similar to 2008, have intensified.”

In general, the fall in the euro tracked the collapse in short-term bond yields in the eurozone. The decline in bond yields means that investors are rapidly lowering their expectations for future rate hikes by the European Central Bank, as the central bank may risk harming the euro system if it follows a path of rapid hikes.

Meanwhile, the stability of the pound sterling relative to the euro suggests that investors have no similar concerns about UK banking stocks. At the same time, shares of the main British banks fell in the region of 4%, which was much less sharp than the names of the euro area.

This is likely to be a reflection of the BoE's stubborn refusal to raise interest rates in the UK as quickly as investors have come to expect it over the past year. The developments mean that the ECB is likely to reconsider its approach to the rate hike cycle in its policy decision on Thursday.

In the forex market, both the euro and the Swiss franc fell sharply. More losses could be on the way if investor concerns about Credit Suisse are not dealt with by the authorities quickly. If the bank fails, that could have major implications for other exposed European banks. to the embattled Swiss lender. Today's fast-moving financial markets have seen attention shift from the (ongoing) banking crisis in the US to Europe. Accordingly, Credit Suisse shares fell by 23%, and the Eurostoxx index of banks fell by 8%. The pressure in the financial markets returned to what it was on Monday.

Euro predictions against the dollar today:

  • According to the performance on the daily chart below, the return of the EUR/USD price to the vicinity of the support level 1.0500 will end the bulls' aspirations to control the performance.
  • Technical indicators will move towards oversold levels if the currency pair moves towards support levels at 1.0480 and 1.0390, respectively.
  • On the other hand, and over the same period of time, the return of the euro / dollar towards the resistance level 1.0785 will be important for the trend to turn bullish.

The reaction from the European Central Bank's announcement today, along with the comments of the European Central Governor Lagarde, and the developments in the US and global banking sector, will have an impact on the direction of the currency pair in the remainder of this week's trading. I still prefer selling the EUR/USD pair from every upside.

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Mahmoud Abdallah
About Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.

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