Fundamental Analysis: ECB Press Conference
European traders await the ECB Press Conference on June 10. European Central Bank holds this monthly press conference about 45 minutes after the Minimum Bid Rate is announced. It is about an hour long and has two parts: First, a prepared statement is read; then the conference is opened to press questions. The questions often lead to unscripted answers that trigger market volatility. The press conference, which is broadcasted on the ECB website, is the ECB's primary method for communicating with investors about monetary policy. It covers in detail the factors that affected the most recent interest rate and other policy decisions, such as the overall economic outlook and inflation. Most importantly, it often provides clues regarding future monetary policy. If the statement is more hawkish than expected, that is usually good for the euro.
The Euro fluctuated and penetrated both the support & the resistance specified in yesterday’s report without being able to reach any of the suggested targets in both cases. This behavior enhances our hypothesis that we are in a wave 4 of a 5-wave decline, since its known in (The Wave Principle) that wave 4 price action appears to be random while this wave is developing, just as it is the case for wave B as well. Breaking below 1.20 on Friday has opened the door for guessing the long term targets in these areas, the question now is where are these targets? In our opinion, we believe that there is one target, one point, which stands out of the crowd, and that is 1.1211, which will be our target for the next few weeks. The importance of this level is that it is the 61.8% Fibonacci for the whole move from the historical low to the historical high. For the short term, the wave count illustrated on the chart, shows a 4-wave drop, in which yesterday’s “break” is wave 4, and we still have room for another leg down below 1.1875, in what would be wave 5. Short term support is at 1.1923, and if broken the Euro will continue its drop to 1.1825, and then 1.1754. The resistance is at 1.1975, and breaking it will give the chance for the Euro to catch a break, and rise to the important 1.2085 & 1.2148.
• 1.1923: the rising trend line from Monday’s low on hourly & intraday charts.
• 1.1825: Feb 27th 2006 low.
• 1.1754: Dec 6th 2005 low.
• 1.1975: important intraday level.
• 1.2085: Fibonacci 61.8% for the last drop from 1.2214.
• 1.2155: the top of the falling channel on the 4-hour chart.
The Dollar/Yen traded below 92.14 for the whole past 24- hours, and did not touch this important resistance. It also dropped to break the support specified in yesterday’s report 91.54, only to settle for 91.23. This very limited action, has postponed the excitement, hopefully for no longer than today, especially after a critical level has appeared this morning, catching all of our attention. This level is the support at 90.52. The reasons which makes this level a shining star standing out is that it combines the rising trend line from May 20th, with June 1st low, giving this level a double importance. But, before we can test this level, we need to break the intraday support 91.11. And if we do, we will drop to test this very important (and hopefully very exciting) level. Breaking here would have serious consequences on this pair, and 89.81 will only be a first & modest target for this break, on the way to lower levels. Resistance is at 91.67, and if broken, the important support test scenario will be void, and we will target 92.67 & 93.70.
• 91.11: important intraday level.
• 90.52: June 1stlow & the important rising trend line on hourly charts.
• 89.81: May 26th low.
• 91.67: the falling trend line from Monday’s top on the hourly chart.
• 92.67: May 16th high.
• 93.70: Apr 14th high.
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