However, the rate consolidated before the ECB policy announcement and the announcement caused a retracement to the support of the passed range and the weekly R1 simple pivot point. After the fundamental event passed, EUR/USD continued the surge.
Meanwhile, Dukascopy statistics show that traders continue to be massively short. By late Thursday, 70% of open position volume was in bearish positions.
ECB follows the Fed
The ECB Main Refinancing Rate has just been released. As expected, the central bank has kept the rate at 4.50%. In addition, the central bank published its Monetary Policy Statement. The event caused a minor 0.20% dip of the EUR/USD.The dip was attributed to a sentence in the policy statement. "Financing Conditions are restrictive and past interest rate increases continue to weigh on demand, which is helping push down inflation." This sentence was seen as a sign that the ECB sees its policy as enough and the central bank could be considering a rate decrease during 2024. A potential rate decrease would reduce demand for the Euro and weaken its value.
The markets expected the no changes, due to the ECB policy being rather easy to predict. In general, the ECB follows the example of the Federal Reserve, despite the Euro Zone having a more complicated economic situation than the US. Namely, the combined European economy has been experiencing higher inflation than the US. In addition, major countries of the union have been showing signs of a recession.
Economic Calendar Analysis
Top event of the week is scheduled for Friday at 13:30 GMT. The United States employment data sets are going to impact the financial markets. The release consists of Average Hourly Earnings change, Non-Farm Employment Change and the Unemployment Rate.
EUR/USD hourly chart analysis
An extension of the ongoing surge is expected to be slowed down by the 1.0940 level where the weekly R3 simple pivot point is located at. Above the pivot point, the rate is set to face the 1.1000 mark, unless a new resistance reveals itself.However, if a retracement back down occurs, the EUR/USD would look for support in the combination of the 1.0900 mark and the weekly R2 simple pivot point at 1.0903. Below 1.0900, the 1.0860/1.0890 range, the weekly R1 simple pivot point and the ascending 50 and 100-hour simple moving averages are expected to act as support. If these levels fail, the 1.0840/1.0860 range and the 200-hour SMA could turn into support.
Hourly Chart
EUR/USD daily chart's review
On the daily candle chart, the EUR/USD is above the 50and 100- day simple moving average. A move above these technical indicators signals a surge to first the 1.1000 mark and afterwards the marked zones higher above.Daily chart
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Traders are short
Since Monday, traders were 65% short, as that amount of open position volume was in short positions.
Meanwhile, pending orders in the 100-pip range around the pair were 74% to sell.
The situation changed by Thursday, as already 70% were short and orders were 66% to sell.
It appears that traders expecting the rate to fail at its recovery.