Market Analysis

The wait-and-see trading stance prevails so far on European benchmarks

FOREX

The euro is trading flat as the European session gets underway, holding on to the gains accrued over the last couple of sessions and remaining above parity with the US dollar. The single currency gathered strength in the run-up to the ECB’s rate decision due to be announced later today. It is predicted that the European Central Bank will announce a rate increase of 75 basis points, and such expectations have offered the single currency some support. However, upside is limited by concerns over the economic prospects for the region. Geopolitical instability on its eastern flank, an ongoing energy crisis, and high inflation, all cast long shadows over the sentiment of investors in relation to the single currency. Against this background, and with the US dollar likely to remain the dominant currency for the foreseeable future, the euro is likely to stay under pressure, despite expectations of further rate hikes before the end of the year and during the first quarter of 2023.

Ricardo Evangelista – Senior Analyst, ActivTrades

Source: ActivTrader

 

EUROPEAN SHARES 
Shares fluctuated on Thursday in Europe, trading sideways in a less volatile fashion than usual, as traders brace for today’s ECB announcement.

The wait-and-see trading stance prevails so far on European benchmarks, following a 4-day rally fuelled by bets of a pivot in hawkish monetary policies. While a 75 basis point rate hike is still widely anticipated, all eyes will be on ECB President Christine Lagarde’s press conference, as investors attempt to get more clues about the central bank’s next move through an analysis of the wording and semantics of her speech. A less aggressive stance from the ECB would be likely to prop up risk appetite everywhere and significantly extend the current rally on stocks towards new highs. But, on the other hand, the lack of any dovish hints either through the decision on rates or through Lagarde’s speech itself, could lead to a sharp sell-off in equities as hopes that were driving markets higher until now would quickly fade. Technically speaking, most EU indices remain well oriented as prices continue to trade inside their short-term bullish channel. The DAX-40 index flirts around its immediate support level above 13,150 pts, but the current bearish divergence registered by the RSI indicator highlights the very-short-term pause and the fact the market is waiting for concrete macro developments to climb higher.

Pierre Veyret– Technical analyst, ActivTrades             

 

Source: ActivTrader

 

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