We are at 12 candles sticks before ECB PResident Mario Draghi makes its statement with regard the interest rate.
In both cases, lowering interest rate to -0.25 or keeping the interest rate as it is will not give an impetus to the market because European Banks own savings will not go to investment or to facilitate the credits line for SME's, and the private savings are already on a very low interest rate and private investor will not use yet there money for assets that may have high risk. If private saving may go to one direction, it may very well be on government bonds and treasury bonds but not to finance SME's.
Therefore if ECB PResident announce a decrease of the interst rate, the market has already bought that and it is almost priced. EURUSD may slide own to 1.355 or 1.3525, but, quickly, this will not look like an step that will be enough to boost again the credit market, and EUR may go upwards again rather quickly toward 1.3660, if this level is broken, 1.3720 and upwards towards 1.3850.
If Draghi do not make any announcement and do not lower the interest rate, EUR will fly to 1.3750, 1.3820, 1.3870 and may even be going upwards towards 1.40XXX
Of courseECB has means to try to stop the move over 1.40XXX and it is a benchmark level for ECB because over 1.40 EU looses its export competititveness.... And this is just one side of the story. Because the other side of the story is FED policy and Yellen decision to stick to the tappering..... or Not....
So let's wait and see, 12 Candles left before the decision.....
In both cases, lowering interest rate to -0.25 or keeping the interest rate as it is will not give an impetus to the market because European Banks own savings will not go to investment or to facilitate the credits line for SME's, and the private savings are already on a very low interest rate and private investor will not use yet there money for assets that may have high risk. If private saving may go to one direction, it may very well be on government bonds and treasury bonds but not to finance SME's.
Therefore if ECB PResident announce a decrease of the interst rate, the market has already bought that and it is almost priced. EURUSD may slide own to 1.355 or 1.3525, but, quickly, this will not look like an step that will be enough to boost again the credit market, and EUR may go upwards again rather quickly toward 1.3660, if this level is broken, 1.3720 and upwards towards 1.3850.
If Draghi do not make any announcement and do not lower the interest rate, EUR will fly to 1.3750, 1.3820, 1.3870 and may even be going upwards towards 1.40XXX
Of courseECB has means to try to stop the move over 1.40XXX and it is a benchmark level for ECB because over 1.40 EU looses its export competititveness.... And this is just one side of the story. Because the other side of the story is FED policy and Yellen decision to stick to the tappering..... or Not....
So let's wait and see, 12 Candles left before the decision.....