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EUR/USD: Monday v Friday

Previous:

The euro closed up after trading on Friday. The single currency managed to reach the D3 line after the publication of the US jobs report. The number of new nonfarm jobs in the states in February grew by 235,000 after a forecast of only 200,000. The figure for December was revised from 157,000 to 155,000 and for January from 227,000 to 238,000. The aggregate change for these two months comes to 9,000.

The labour force participation rate grew from 62.9% to 63%. Unemployment has fallen to 4.7% (forecasted: 4.7%, previous figure: 4.8%). Average hourly earnings in the US rose by 0.2% (forecasted: 0.3%, previous figure revised from 0.1% to 0.2%).

The euro's initial reaction to all this data was a slide to 1.0594. The pair then started a phase of growth as traders started to buy euros on all the crosses. By the end of the day, the exchange rate has risen from 1.0582 to 1.0671.

The euro rose across the board after it was reported by Bloomberg that during their meeting, the ECB bosses had discussed the possibility of raising interest rates as the QE program reaches its final stage. They reported that the governing council didn't make any concrete plans or set any deadlines, but that council members simply exchanged opinions on the matter.

Market expectations:

In Asia, the euro has risen to 1.0700 on the back of a slide in US bond yields and some growth on the euro index. Given that the euro grew throughout Friday and closed up, today (Monday), I'm expecting to see movement against Friday's. In this regard, I'm setting a target of 1.0658. If buyers start to lock in their profits from the growth of the last two trading days, then we could see a price correction to 1.0632.

Day's news (GMT 3):

  • ECB member Lautenschläger's speech;
  • ECB member Draghi's speech;
  • ECB member Constâncio's speech;
  • ECB member Praet's speech.

EURUSD rate on the hourly. Source: TradingView

Intraday forecast: low: 1.0658, high: 1.0705, close: 1.0670.

The euro rate has restored from a low of 1.0525 to the 157th degree. Given that trading on the euro closed up on Friday, today I'm expecting it to fall to around 1.0658. If it starts to fall ahead of schedule, we can revise our target to 1.0632.

If the trend line gets broken through, pressure on the euro will increase. In this case, the rate will continue to decline through to Wednesday. Once the Fed officially announces its interest rate decision, the euro will strengthen once again.

Positives for the euro ( ):

Fundamental:

( ) US president Donald Trump favours a weaker dollar;

( ) The threshold for acceptable US government debt of 20.1 trillion USD may be reached by March this year. This will create headaches for new US president Donald Trump. A new law on the debt ceiling will come into force on the 16th of March 2017;

( ) The Greek government has made some progress in its talks with international creditors on the second stage of their reform program;

( ) Head of the ECB, Mario Draghi, has hinted that the central bank may not need to provide any further stimulus to revitalise Europe's economy. From April to December 2017, the ECB will reduce their monthly assets purchases to 80 to 60 billion EUR;

( ) ECB bosses have discussed the possibility of raising interest rates before the QE program comes to an end;

Technical (short-term):

( ) Long/short ratio according to myfxbook as of 7:30 EET: 70%/29%, lots: 24102/10020 (previous day: 15330/17193), positions: 57118/22205 (previous day: 42399/38840)

( ) German 10-year bond yields: 0.483% (up 13.64% from 10/03/17);

( ) In Asia, US 10Y bond yields have fallen by 0.15% to 2.578%;

( ) EURGBP (W):  the CCI (20), AC and the Stochastic (5,3,3) are moving upwards;

( ) EURGBP (D): the AO and Stochastic (5,3,3) are moving upwards. The trend line has been broken through;

( ) EURUSD (M): the Stochastic (5,3,3) is moving upwards;

( ) EURUSD (W): The Stochastic (5,3,3), AO, AC, and CCI (20) have reversed upwards;

( ) EURUSD (D): the Stochastic (5,3,3), AC, and AO indicators are moving upwards. The CCI (20) is in the zone above 100. The trend line has been broken through;

Negatives for the euro (-):

Fundamental:

(-) According to CME Group's FedWatch Tool, as of Friday the 10th of March, the probability of a rate hike in March has fallen from 90.8% to 88.6%, in May from 91.8% to 89.6%, and in June from 95.9% to 95.4%;

(-) Political uncertainty in Europe (French elections and Brexit). Ex-Prime Minister Alain Juppe has ruled himself out of participation in the French presidential elections;

(-) strong NFP report;

Technical factors (short-term):

(-) According to data from 07/03/17, large speculators on the Chicago Exchange have increased their long and decreased their short positions. Long positions have fallen by 5,404 to 137,358 contracts, while short positions have grown by 8,820 to 196,124 contracts. Net short positions have grown from 44,542 to 58,766 contracts.

(-) US 10-year bond yields have risen to 2.582% (up 0.27% from 10/03/17);

 (-) EURUSD (M): the AO and AC indicators are moving downwards;

(-) EURGBP (D): the AC and CCI (20) indicators are moving downwards;

Built into the price:

(-) President of the Philadelphia Fed, Patrick Harker, has hinted at a rate hike in March;

(-) President of the Dallas Fed, Kaplan, says that it's better to raise rates sooner rather than later;

(-) President of the San Francisco Fed, John Williams, says that March is a good time for the FOMC to seriously consider a rate hike;

(-) FOMC member Lael Brainard says that the US economy is growing, and that a rate hike would soon be appropriate;

(-) Head of the FOMC, Janet Yellen, has said that interest rates might be raised in March;

(-) Head of the Fed in Richmond, Lacker, has said that losing control over inflation could prove very costly;

(-) Vice-president of the Federal Reserve, Stanley Fischer, echoes his colleagues' comments about rate hikes;

( ) François Bayrou, leader of the "Democratic Movement" party, has ruled out running for the presidency and thrown his weight behind independent candidate Emmanuel Macron;

( ) Marine Le Pen has had her EU parliamentary immunity from prosecution lifted for political reasons.



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