The common European currency trades either side of the 0,9900 level awaiting tomorrow’s key day for the European Central Bank’s rates hike decision.
Several analysts give the possibility that the decision will be 75 basis points, above the base case scenario that expects 50.
I have some doubts about whether 75 basis points is appropriate at this point in time for the Eurozone economy.
According to today’s data on the growth rate of the Eurozone, although the positive ground remains, the energy crisis leaves open the possibility that by the end of the year we will see signs of recession.
The pair remains in a mild bearish channel with corrections still appearing with excellent fidelity.
As we mentioned in a previous article the target for the 0.9850 level almost achieved ( 0.9864 yesterday’s low ) but with signs of reaction from European currency appearing again. The next two days are expected to be characterized by intense volatility ahead of tomorrow’s Ecb decision.
Currently the market does not appear to be positioned for the possibility of a 75 basis point increase and any decision on such an increase will come as a pleasant surprise to buyers of the currency and is expected to drive the pair higher.
In any case I maintain the strategy to buying on dips of the pair as the pattern of corrections continues with excellent fidelity.
