After a day full of economic releases yesterday from the US, leading to notable increase in volatility across the board, another day comes in with another significant events, which should have a notable impact on the markets.
Lets take a look at the US Economic Releases
US Durable Goods Jumps 2.2% in September
New orders for US manufactured durable goods rose 2.2 percent month-over-month in September of 2017, following an upwardly revised 2 percent increase in August and well above market expectations of a 1 percent gain.
Orders for transport equipment went up 5.1 percent and those for non-defense aircraft and parts jumped 31.5 percent, mainly due to a rise in Boeing aircraft orders.
Non-defense capital goods orders excluding aircraft, seen as a proxy for business spending plans increased 1.3 percent, following an upwardly revised 1.3 percent gain in the previous month.
US New Home Sales at Near 10-Year High
Sales of new single-family houses in the United States jumped 18.9 percent to a seasonally adjusted annual rate of 667 thousand in September of 2017, beating market expectations of a 0.9 percent decline. It is the highest value since October of 2007 and the largest percentage gain since January of 1992.
Sales rose in all four regions with those in the South surging 25.8 percent after a 1 percent fall in August which was partly the result of Hurricanes Harvey and Irma.
Today’s Main Event
Today, all eyes will be headed toward the European Central Bank decision, which is scheduled to be announced at 11:45 GMT+, while the most important event is the press conference, which usually starts at 12:30 GMT+.
The estimates point to no change when it comes to rates, the minimum bid rate is expected to remain at 0.0%, while the deposit rate is expected to remain at -0.4%.
However, what matter’s the most in today’s decision is whether the ECB will decide to reduce the size of the ongoing QE.
In the previous meeting, the ECB Chair Mario Draghi said that a bulk of measures will be announced in October meeting regarding the ongoing QE.
Therefore, we already know that there is a very high possibility that the ECB will reduce its asset purchases program.
The most important point here is the size of the reduction. Estimates points to 20B, to bring down the current monthly purchases to 40B down from 60B Euros. Any number below 20B would be a considered as disappointing.
How To Trade ECB Decision
If you are a forex trader, you need first to consider your risk level and how much you will be able to handle the loss, if the market goes against you.
From a technical point of view, the Euro have been trading within a tight range since the beginning of the month, while it managed to remain supported by two major levels between 1.1680 and 1.1720’s. Those are the two levels that we will be looking at, especially if the Euro drops for whatever reason.
Reducing the ongoing QE with a plan to reduce it once again in the next meeting is likely to keep the Euro bids on the rise. Therefore, our risk should be below the levels mentioned above. As a breakthrough those levels would clear the way for another leg lower, to complete the head and shoulder pattern on the daily chart, which might be targeting 1.1450 over the next few days.
On the upside view, a break above 1.1873 is needed, which should eliminate the bearish head and shoulders patter, and would open the way for another rally, well above 1.19 and 1.1950 for now.
Edited by:
Nour Eldeen Al-Hammoury
Market Analyst
