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Euro Expected to Recoil before Weekend

Hourly

Yesterday’s Trading:

On Thursday the euro/dollar closed down. The USD strengthened on the back of Q2 US GDP and employment data being better than expected. Strong GDP data increased the possibility of an increase in the US base rate this September.

The revised GDP figure showed a Q2 growth from 2.3% to 3.7% YOY. The forecast was 3.2%. The number of applications for unemployment benefit in the country fell from 277,000 to 271,000.

The Dow Jones Industrial Average was up by 369.26 (2.27%) to 16,654.77 points for the year at close on Thursday. The S&P 500 closed up by 47.15 points (2.43%) to 1,987.66 points. The Nasdaq Composite closed up by 115.2 ( 2.45%) to 4,812.57 points.

The euro/dollar was way off the trend all day. After Europe closed, a correction from a 1.1202 minimum began. The rate corrected itself to 1.1278 and is currently around 1.1264.

Main news of the day:

  • At 11:30 EET, the UK is publishing Q2 GDP values;
  • At 12:00 EET, Germany will release consumer price data for August;
  • At 15:30 EET, the USA’s July values on personal incomes and expenses and the base index for expenses on consumer products will be out;
  • At 17:00 EET, Reuters/Michigan August consumer confidence index will be in the public eye;
  • At 20:00 EET the Jackson Hall economic symposium will be underway.

Market Expectations:

Taking the three-day fall of the euro into account, I’m expecting a return to the LB. A growth may by steeper than I’ve forecasted since it’s Friday today (closure of short positions before the weekend).

Look at the euro rally for the 20th, 21st and 24th August. Three days of growth, two days being way off the trend and then a sharp fall by 300 points. I don’t expect a growth by 300 points, but why not one to 1.1330. The key event of the day is Q2 GDP for the UK being out. If you think the States often reassess their initial numbers then the Brits hardly ever do. If they don’t reassess them, a growth of 30 points on the pound due to a correction is expected. The euro/dollar will follow the pound.

Technical Analysis:

  • Intraday target: maximum: 1.1330 (in Europe: 112 degrees), minimum: 1.1225 (in Europe), close: 1.1280;
  • Intraday volatility for last 10 weeks: 119 points (4 figures).

The euro dollar has returned to the MA channel. Be careful with purchases, since the stochastic is pointing upwards. The market could repeat yesterday’s movement, but with less amplitude.

If the euro/dollar heads quickly for 1.13, it’s worth waiting for a break in the trend line. I’ve limited myself to a growth to 112 degrees.

 
 

GBP/USD Hourly Graph

Daily

So, the euro/dollar is down from a 1.1712 maximum by 5 figures (500 points – 4 figures after the point). A pinbar has formed on the weekly. The sellers need to hold on to their positions at the current level. Taking into account that today is Friday and traders want to close their short positions before the week’s end, it’s likely that we’ll see a rebound to 1.1330. The sellers need to stick to their guns around 1.1370 and not give the buyers chance to close higher. Now to the weekly.

 
 

GBP/USD Daily Graph

Weekly

On the weekly period we can see a pinbar has formed. The sellers need to stand firm at the current level. A red would be better than a green for a further fall in euro. If the euro/dollar drops to 1.1130 by Tuesday, the pinbar will also form on the monthly. In which case everyone will again be talking about the dollar and it reaching parity with the euro. For today, however, I’m expecting a euro rebound.

 
 

GBP/USD Weekly Graph



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