Daily Alert – Thursday 4th May 2023: All eyes on ECB (and EURUSD)

Mark NugentDaily Alert, May 2023

Daily Alert – Thursday 4th May 2023: All eyes on ECB (and EURUSD)

Good morning.

Yesterday’s Fed rate announcement went largely as expected. The rate was hiked by 25 basis-points to 5.00% – 5.25%. Fed Chair Powell hinted that the bank would now pause with the hiking. He also pushed back significantly against the market expectation of rate cuts before year-end.

We also saw PacWest, a troubled small bank in the US, that has seen its shares tumble this week, announce that it was considering all “strategic options”. Never a good sign frankly. Maybe another small morsel for Jamie Dimon over at J P Morgan?

I closed half my EURUSD long last night and the remainder this morning for a gain of around 2%.

Looking forward, it’s all eyes on the European Central Bank at lunchtime as we expect President Lagarde to hike again and to maintain the hawkish narrative. This should consolidate a strong EUR which we can combine with a weak USD. In fact, Deutsche Bank are predicting EURUSD rising to 1.15 by mid-year. That’s 6 times daily ATR and mid-year is not so far away.

Some people like to trade lots of instruments every day. They love novelty and seek thrills. They don’t last long. Why would you trade multiple instruments when you can trade one with an unusually high probability of success? EURUSD long looks like a high probability option to me.

I’ll be back tomorrow.

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