Two major events are shaping up today, and they are expected to be the most important in the second quarter. Markets are expected to react strongly to both: The ECB (European Central Bank) and BOC (Bank of Canada) meetings.
The ECB started 2015 by changing the way the monetary policy is transmitted, as it is modifying both the number of meetings in a calendar year and the day that interest rate decisions are announced.
For many years, we’ve had the ECB meetings on the first Thursday of each month. Starting this year, they will now meet every eight weeks on a Wednesday.
As always, it is about the press conference and not the actual interest rate announcement today, as rates are pretty low. I would say at the lower boundary, the quantitative easing program is in place, so nothing new is expected in that area.
What should you look for at the press conference?
Is Mr. Draghi, the President of the ECB, emphasizing better conditions in Europe? This could boost the common currency by a bit. However, this should only be temporary as the focus will be on the Greek situation and how this may drag on the Euro.
And for the BOC?
Today’s meeting is capital in having an objective view on the Canadian economy, in the sense that last Friday’s jobs data, while pretty impressive, was being formed out of mainly part-time jobs.
If you add the oil into the equation then you have the full picture of the impact this meeting has, showing that the Canadian economy is heavily dependent on what is happening on the oil market.
From my point of view, we should not see any rate cuts, but again, the focus is on the press conference and checking if a bearish tone is used, as this should be sent CAD to weaker levels.
As a strategy, I am favoring buying EURUSD from lower levels, namely from below the 1.0460 area, ideally from below 1.04 as this area has a bouncing potential.
USDCAD on the other hand is bullish until 1.2700 where going short with a stop loss at the 1.2845 highs would be the wise thing to do.
As usual with such events, look for volatility to rise into the press conference and expect vicious moves immediately thereafter.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
