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EUR/USD: 1.0815 level to act as support

Previous:

The euro/dollar pair has closed the week up four times in a row now. On Friday, the dollar fell across the whole market as the proposed bill to dismantle Obamacare was withdrawn from Congress due to a lack of support from Republicans. The US media labeled the incident a political defeat for Donald Trump's administration while the opposition celebrated it as their own victory.

Investors started to doubt whether or not Mr. Trump would be able to make good on the promises he made during his election campaign (increased infrastructure spending and lower taxes).

Market expectations:

Trading today has opened with the dollar down. The EUR/USD rate has reached 1.0850. Given that the euro rose against the dollar in Asia on Friday, I'm expecting it to fall to 1.0815 by Monday's end.

Day's news (GMT 3):

  • 11:00 Germany: IFO business climate (Mar); Eurozone: M3 money supply (Feb), private loans (Feb);
  • 12:20 Eurozone: ECB member Lautenschläger's speech;
  • 15:00 Eurozone: ECB member Prat's speech;
  • 19:30 Eurozone: ECB member Weidmann's speech;
  • 20:15 USA: FOMC member Evans' speech.

EURUSD rate on the hourly. Source: TradingView.

Intraday forecast: low: 1.0815, high: 1.0854, close: 1.0815.

Today, the dollar is depreciating across the whole market and the euro has reached 1.0850 level. My forecast is predicting movement against Asia's and Friday's, with a target of 1.0815.

You may be wondering why I've gone for a relatively small price change. For today, I've found that 13:50 EET will be a turning point for the formation of a minimum. Until this time, the rate can fall only as far as the trend line at around 1.0820/25. It would be wise, though, to wait for a drop to the balance line at 1.0798, from which a new rally could start.

I've also factored in that this morning, the market has bucked a lot of buyers. According to myfxbook, on Friday at 7:38 EET, open positions from traders amounted to 29272 lots. Now, there are only 10206 lots, representing a 65% drop. Given a similar drop in long positions (take profit), the ratio didn't change much and came to 83%/16%. Although, short positions have decreased, this imbalance will act as a support for buyers.

The EUR/USD is trading between the 67th and 90th degrees. On the weekly timeframe, the target is 1.1021. Today, on the MA U3 line, the road to 1.0904 is open.

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 came 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;

( ) Ewald Nowotny, a member of the ECB's governing council, has said that the bank could raise the deposit rate before the main refinancing rate;

( ) On the 24th of March, Donald Trump withdrew his proposed healthcare bill to replace Obamacare from the US Congress' agenda;

Technical (short-term):

( ) According to data from 21/03/17, large speculators on the Chicago Exchange have significantly increased their long and decreased their short positions. Long positions have grown by 10,138 to 158,646 contracts, while short positions have fallen by 10,325 to 176,891 contracts. Net short positions have fallen from 38,707 to 18,245 contracts. Small speculators have increased their long positions by 3,811 to 65,280 contracts and short positions by 4,779 to 63,093 contracts. Net long positions have fallen from 3,158 to 2,178 contracts;

( ) Short/long ratio according to myfxbook as of 06:38 EET: 83%/16%, lots: 10206/2033 (previous day: 29272/9309), positions: 27422/7518 (previous day: 68276/31988);

( ) In Asia, US 10Y bond yields have fallen by 1.43% to 2.366%;

( ) EURGBP (W):  the CCI (20), AO and AC are up. The trend line has been broken through;

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

( ) EURUSD (W): The Stochastic (5,3,3), AO, AC, and CCI (20) are up;

( ) EURUSD (D): the AO indicator is up, the Stochastic (5,3,3) and CCI (20) are trying to reverse upwards;

Negatives for the euro (-):

Fundamental:

(-) According to CME Group's FedWatch Tool on Friday  the 24th of March, the probability of a rate hike in May remains 6.4%. The probability in June has grown from 49.6% to 54% and in July from 57.1% to 60.8%;

(-) Political uncertainty in Europe (French elections and Brexit);

(-) Fed member Evans is expecting 2-3 rate hikes in 2017. The Federal Reserve will make a decision about the next hike in June;

(-) President of the Philadelphia Fed, Harker, announced that the Federal Reserve will continue to gradually increase interest rates throughout 2017;

Technical factors (short-term):

(-) German 10-year bond yields: 0.403% (down 2.18% from 24/03/17);

(-) US 10-year bond yields: 2.4198% (down 0.01% from 24/03/17);

(-) EURGBP (W): The Stochastic (5,3,3) is up;

(-) EURGBP (D): the AO and CCI (20) indicators are down;

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

(-) EURUSD (D): the AC indicator is down;

Built into the price:

(-)  The Ex-Prime Minister of France, Alain Juppe, has ruled himself out of participating in the presidential election;

( ) 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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