empty
 
 
24.03.2024 01:59 PM
EU inflation will continue to fall, ECB may cut rate faster

This image is no longer relevant

Friday ended rather uneventfully for both instruments. However, there were a few events that deserved attention. I can't say they are particularly important, but European Central Bank President Christine Lagarde's speeches don't happen every day. However, this time Lagarde was quite brief. She only mentioned that she and the entire monetary committee expect inflation to continue to slow down. Lagarde has already mentioned this twice.

Lagarde also said that economic growth is projected to pick up in the course of 2024, mainly driven by increasing purchasing power. There was nothing else particularly interesting in her speech. Also on Friday, Bundesbank President Joachim Nagel spoke. His speech was quite important for the euro, as Nagel directly mentioned the rate cuts. "The probability is increasing that we will see a first rate cut before the summer break," said Joachim Nagel, who is a member of the European Central Bank's governing council. He also mentioned that the central bank is leaning towards starting policy easing in June, but April can't be completely ruled out. From this, I conclude that the ECB will be ready to initiate the first round of rate cuts in April if necessary. And the need may be very simple and trivial. If inflation continues to fall, the ECB simply won't have grounds to keep the rate at its peak level. Inflation is already at 2.6% annually. If it slows down to 2.3-2.4% in March, the ECB may move to lower rates as soon as April.

This image is no longer relevant

This is bad news for the euro, as at the same time the Federal Reserve continues to postpone the first rate cut to later dates. Based on this, the ECB may be the first to initiate easing, although the market has been expecting the opposite in recent months. It is this contradiction between expectations and reality that may support market demand for the dollar and weaken demand for the single currency. Such a news background fully supports the current wave pattern.

Wave analysis for EUR/USD:

Based on the conducted analysis of EUR/USD, I conclude that a bearish wave set is being formed. Wave 2 or b is complete, so in the near future, I expect an impulsive downward wave 3 or c to form with a significant decline in the instrument. An internal corrective wave is currently being formed, which could have already ended. I am considering short positions with targets near the 1.0462 mark, which corresponds to 127.2% according to Fibonacci.

This image is no longer relevant

Wave analysis for GBP/USD:

The wave pattern of the GBP/USD instrument suggests a decline. I am considering selling the instrument with targets below the 1.2039 level, because I believe that wave 3 or c will start sooner or later. However, unless wave 2 or b ends, the instrument can still rise to the level of 1.3140, which corresponds to 100.0% Fibonacci. The construction of wave 3 or c may have already started, but the quotes haven't moved far away from the peaks, so we cannot confirm this. A breakthrough of 1.2715 will encourage those who are bearish.

Key principles of my analysis:

Wave structures should be simple and understandable. Complex structures are difficult to work with, and they often bring changes.

If you are not confident about the market's movement, it would be better not to enter it.

We cannot guarantee the direction of movement. Don't forget about Stop Loss orders.

Wave analysis can be combined with other types of analysis and trading strategies.

Chin Zhao,
Analytical expert of InstaForex
© 2007-2024
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST
  • Chancy Deposit
    Deposit your account with $3,000 and get $5000 more!
    In November we raffle $5000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
    JOIN CONTEST
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
    JOIN CONTEST
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
    GET BONUS
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
    GET BONUS
  • 30% Bonus
    Receive a 30% bonus every time you top up your account
    GET BONUS

Recommended Stories

Can't speak right now?
Ask your question in the chat.
Widget callback