It was announced on Thursday that the rate of European Central Bank would lower from 1.0% to 0.75%. Which can be regarded as a signal of priming the economy that together with the approval to allocate 100 billion euros for banking sector of Spain for financing its obligations, must be considered by markets a positive sign of possibility to recover. But the markets have not increased, and euro rate decreased on Thursday.
The reason of such “incomprehensible reaction” might be the president of European Central Bank Mario Draghi’s statements about permanent risks for European economy, lack of economic development and a catastrophically high unemployment rate, and also constant sovereign debts. All of these might destroy the efforts to regenerate the economy. These problems are long-existing, whereas the news about rate decrease has appeared today. Then why didn’t the investors and speculators react to this fact by rate increase?
Probably the reason is that the reduction in the bank rate demonstrates that the Eurozone is in submarginal condition and that only allocating money to the financial sector will allow avoiding mass defaults. That might be the case. But this is a biased and purely emotional opinion of an alarmist.
Nevertheless the rates of Eurodollar decreased significantly on Thursday and approached support level of 1.2320, the testing of which will be held most likely on Friday. Also on Friday a certain reverse of market is expected, after the emotional decrease of today and bare constructivism may come to market. We might see a rebound from support level of EURUSD starting from lunchtime.
It is possible to enter a market with eurodollar only with break-down of 1.2320 level, but with a short stop, since this level is important and it is not ruled out that it can be used for false break-downs.Social button for Joomla