The ECB left monetary policy unchanged and will wait for evidence that their policies are working before adjusting rates higher. The likelihood is that the June meeting will be more significant as the current monetary policy is designed to support the eurozone during the pandemic disruptions and the covid-19 situation doesn’t look likely to be any better within the next meeting period.
European equities traded higher but most notably the DAX printed 153328 which is in the range that short-sellers of this market will start to get interested in. We had a period between the 6th April to 16th April which was a very tight consolidation, then recently that range has been tested to the up and downside, with today’s price action correcting back into the range. Setting up the bearish continuation pattern. Conservative traders may wait to see some bearish market structure to be put in on the lower time frames and whilst the US stock market attempts to go higher in this US session, European traders may have to wait for Monday before getting a clear lower swing high to mitigate risk.
The EURUSD has had a down day today after the ECB President Lagarde delivered a wait-and-see assessment during the press conference. Leaving the US dollar to dominate its counterparts in the FX majors. European consumer confidence data was better than expectations but still negative which weighed on the single currency. The ActivTrader sentiment indicator shows that 70% of traders are bearish the currency pair, though the daily 50ema and 200ema, still remain in a bullish trend.
The US initial jobless claims look like they are starting to print lower on a weekly basis now and although they are still extraordinarily high, the trend is to the downside this last couple of weeks and a decent amount below the dreaded 700k. This is good news for the US economy which was mildly tempered by new announcements circulating that the Biden Administration is looking to impose taxes on the rich to fund childcare.
In other good news for the US risk-on trades, there was word that US health officials are likely to recommend the resumption of J&J coronavirus vaccinations, with the additional warning as per the European Medicines Agency regarding rare blood clot risks.
There will be Japanese Tier-1 data tomorrow regarding their inflation figures and as per the DAX trading idea, I will be looking to see whether or not we get a retracement to the 109.70 level on the USDJPY over the next week or so, before expecting to see some more downside. Inflation in Japan has been rising these last few months and we could see the Yen appreciate on continued higher inflation prints. There is the downside to consider due to the increasing disruptions from the coronavirus lockdowns that the major Japanese economic hubs are having to deal with. So, one to watch and wait for decent risk to reward trades as there are a good number of pips to the upside should we accept back above 108.53 before the bearish scenario for USDJPY would play out. The ActivTrader sentiment indicator shows that 60% of traders do believe there will be higher prices to come.