ECB's Centeno Calls for Sharp Rate Hikes

Summary:

On September 8, Mario Centeno, a member of the European Central Bank's Governing Council, said the central bank must be cautious in subsequent meetings after a sharp interest rate hike underlined its determination to curb high inflation. The ECB raised interest rates by 75 basis points in a historic move to catch up with the Fed in terms of the strength of its policy to curb price spikes. ECB officials said they expect to raise borrowing costs further in the next few meetings, but the exact magnitude was not specified. Despite his usual cautious stance, he declared that the ECB's rare move to raise interest rates in a big step "sends the right signal", demonstrating to the government and workers the central bank's determination to fight inflation.

BUY EURUSD

Close Time

CLOSED

0.99650

Entry Price

1.00120

0.99160

1.16142 -0.00075 -0.06%

49.0

Pips

Loss

0.99160

Exit Price

0.99650

Entry Price

1.00120

1. Fundamentals

The Bank of Portugal governor said in an interview in Prague that the decision to take a big step to raise interest rates was "very important", but officials must remain predictable thereafter and must prevent policy actions from changing back and forth.

The ECB raised interest rates by 75 basis points in one historic move to catch up with the Fed in terms of the strength of its policy to curb price spikes. ECB officials said they expect to raise borrowing costs further in the next few meetings, but the exact magnitude was not specified.

Centeno did not reveal his preference, but he described the governing council's rate decision as "Produce effects early on".

"It means we're moving faster than we thought we would in June or even July," he said. "While it doesn't mean we're raising the interest rate endpoint."

If the interest rate endpoint is not raised, then Centeno's "Produce effects early on" statement means that the subsequent rate hike may become smaller. However, there are also members of the Governing Council who are open to another 75-basis point hike in October.

Centeno believes that it is still too early to discuss tapering the 5 trillion euros of bonds purchased by the ECB during the recent crisis.

"The policy rate is clearly the best tool we have to deal with the current situation," Centeno said.

Despite his usual cautious stance, he declared that the ECB's rare move to raise interest rates in a big step "sends the right signal", demonstrating to the government and workers the central bank's determination to fight inflation.

2. Technical Analysis

2.1 EURUSD Weekly Chart

EURUSD: ECB's Centeno Calls for Sharp Rate Hikes_1

The key resistance above is 1.01310.

2.2 EURUSD Daily Chart

EURUSD: ECB's Centeno Calls for Sharp Rate Hikes_2

The support below is 1.00190.

2.3 EURUSD 4H Chart

EURUSD: ECB's Centeno Calls for Sharp Rate Hikes_3

The support below is 1.00280.

2.4 EURUSD 1H Chart

EURUSD: ECB's Centeno Calls for Sharp Rate Hikes_4

Focus on the key range of 1.00710 to 1.00280.

The key support below is around 1.00280.

Trading Recommendations

Go long on EURUSD at lows.

Entry price: 0.99650

Take profit: 1.00120

Stop loss: 0.99160

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