EUR/USD Breakout Following ECB Meeting Brings April High on the Radar
I am looking at the forex charts of EUR/USD right now and see a breakout following the ECB meeting. It looks like a bounce from around 2.15pm UK time to near two points below the 1.90 mark. The EUR/USD exchange rate seems to be on the upswing after a day of volatile price action. It is not really too surprising to see such a big move in the forex market given that the ECB did not do anything drastic.
Perhaps, they were hoping that market participants would forget the central bank’s statement and not react strongly to the news. This was not the case though.
It was quite apparent that they are doing just that, with the press releases, announcements and possible steps against effective devaluation of the Euro. Nevertheless, many traders and investors are still quite bearish on the Euro despite the ECB’s actions. Many will probably hold off from making any further large bets on the EUR/USD exchange rate until a full recovery in the markets has occurred. After all, this would be just the kind of news that people were waiting for.
One thing that may actually make the EUR/USD exchange rate less strong would be if markets start reacting to the European Central Bank’s statement as early as tomorrow (Monday). It is difficult to say how the news will actually affect the currency. However, the announcement should definitely push it down a bit.
Once the ECB gets done what it was sent out to do, it can start moving to the high resistance zone on the chart. It is my view that once they get to this level, the EUR/USD would regain some lost ground.
In terms of timing, the best time to buy is on Monday after the news has been released and the market has been quiet for a while. However, since this is the first major announcement by the ECB, there is a good chance that the news could get leaked prematurely, causing even further sell off.
I am not sure why some forex traders believe that the news will have no effect on the EUR/USD in the European markets. I am sure that they feel that any news would have a big effect on the currency, but I do not. It may look like I am going for a conspiracy theory here, but my point is that traders should be more realistic in their predictions and move away from long-term trading based on the news.
This article is also for those who are looking for a buy and hold trade with the EUR/USD, regardless of whether the EUR/USD exchange rate is really weak or strong. You can sell the EUR/USD if you want to, but you may be surprised when the effects of the ECB’s actions do show up in the currency.
Once the markets have come back to their normal rhythms, the ECB might not even need to hold news conferences or speak at length about the situation in the Eurozone, and this would cause the EUR/USD to slowly rebound. This may be a good time to buy on the EUR/USD.
As far as I am concerned, anyone who wants to gain exposure to the EUR/USD must use the buy and hold strategy because this is where forex traders should put money if they wish to stay in the game. Do not invest in long term forex strategies like technical analysis or fundamental analysis because they will just make things worse for you. The only way to have long term success in the free market is to be very conservative in your decisions.
I have seen a lot of experts talking about buying low and selling high in the forex market in the past weeks. This is where I agree with them that you should wait for the markets to get back to normal before doing anything more than buying and holding.
At this point, it is just a simple strategy that has worked for me, so it does not appear to be anything special. compared to what others are doing.