The European Central Bank raised rates by 50 basis points

The European Central Bank raised rates by 50 basis points

During the European Central Bank press conference, Christine Lagarde appeared to be speaking from both sides of her mouth.

The ECB raised interest rates by 50 basis points to cut the processing rate to 3.00%, as expected. This is the highest level since 2008! In addition, the statement spoke of an additional 50 basis point rate hike at the March meeting. Decisions will then be made from meeting to meeting.

However, during the press conference, Christine Lagarde appeared to speak with both sides of her mouth. At one point, she said that the European Central Bank “intends” to raise rates by 50 basis points. Thus, the March rate increase does not look like a done deal. However, she later said that under all scenarios a significant increase was needed (referring to the 50 bps increase in March).

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Like yesterday’s FOMC meeting, the ECB’s announcement was “as expected” while Christine Lagarde’s press conference was less belligerent than expected and even a little confusing.

The EUR/JPY pair was one of the main drivers after the appreciation and the press conference that followed. After a week and a half sideways movement between the 50-day and 200-day moving averages (140.92/141.79), the EUR/JPY sold off aggressively. The pair has broken below the recent range and has enough room to go lower. The first support will appear only at the January 3 lows at 137.39.

Below this level, the price could fall to the 50% retracement level and then to the 61.8% Fibonacci retracement level from the 2022 lows to the 2022 highs at 136.40 and 133.56, respectively. Resistance is close to the low of the recent range and the 200-day moving average. Above the high of the range and the 50-day moving average, the price could move towards the lower rising wedge trend line (the pair fell below Dec 20, 2022) near 145.65.

EUR/JPY daily chart

Source: Tradingview, Stone X

** A few hours after the press conference, as after the last press conferences, European Central Bank “sources” were there to clarify anything that might have been missed or misinterpreted. This time around, the sources noted that there could be one or two more rate hikes of 25 or 50 basis points, and that they expect a final rate of around 3.5%.

The European Central Bank raised rates by 50 basis points, as expected, and said it intends to raise them again at its March meeting. However, Christine Lagarde seemed less optimistic about this. The EUR/JPY sold off aggressively after the meeting and during the press conference. There is strong resistance above the pair. But if it returns above the recent range, it will have plenty of room to work!

Joe Perry, CMT, » Official site stock exchange fomc

Disclaimer: The information and opinions contained in this report are for general information only and do not constitute an offer or solicitation to buy or sell any currency contracts or CFDs. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness and accepts no liability for any direct, indirect or consequential damages that may result from anyone relying to such information.

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