Market Analysis

How are the markets reacting after the ECB’s decision?

Since Tuesday the markets have been driven by hope again. Jerome Powell, the head of the US Federal Reserve, is no longer vehemently opposed to a possible rate cut. This boosted the markets and helped the EuroStoxx50 to jump over the 3,333 points area.

Yesterday’s meeting of the European Central Bank (ECB) brought the result predicted by investors in terms of the interest rate decision but disappointed some investors. European investors were not expecting the ECB to make any changes to interest rates. Mario Draghi, the President of the European Central Bank, met their expectations when he expressed, in his Forward Guidance, that interest rates will probably not change until the end of the year.

On the other hand, many investors were eagerly awaiting the decision on the longer-term interest rates on loans that the ECB will provide to the commercial banks. The so-called TLTROs III, which are to be issued from September 2019, will be cheap, but not as cheap as some investors had hoped.

Following Mario Draghi’s speech, the EuroStoxx50 traded below the important mark of 3,333 points.

Basically, the ECB has signaled, with its Forward Guidance, a sign for further cheap money for banks, which could initially be received positively by the markets. However, the economy is already showing signs of cooling. How will the markets deal with the news in the coming days?

The EuroStoxx50 is in a sideways consolidation below its upward trend line. Yesterday the market tried to climb above the crucial structural level in the 3,333 points range but failed. To show higher prices, the market must break through the zone at 3,333 points. Further structural resistance could then be at 3,400 and 3,457 points, respectively.

If the bulls are too weak, there could be support in the zones of 3,247, 3,180 and 3,114 points.

The MACD oscillator is still in negative territory with a slight tendency for a bullish cross.


Euro50Jun19 - daily chart. Source: ActivTrader

Euro50Jun19 Daily Chart | Source: ActivTrader


Written by Daniel Schuetz, External Analyst, ActivTrades

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