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EUR/USD: the trend line has been broken through

Previous:

The single currency closed slightly down against the dollar on Wednesday. Now, on the daily timeframe, the 1.0630 price level is being protected by two hammers (imperfect). At first, strong PMI data from the UK brought the Euro down from its high of 1.0689, after which a further slide was triggered by the ADP report.

The private sector added 263,000 new jobs in March, providing the US dollar with some support. Still, no one paid attention to the fact that February's figure was revised down by 53,000.

Currency markets underwent a surge in volatility after the FOMC's minutes were published. the Euro reluctantly renewed the weekly minimum, from which it subsequently rebounded upwards by 49 pips to 1.0682. This recovery was facilitated by a fall in US bond yields from 2.382% to 2.326%.

The US central bank discussed reducing their balance sheet, which currently amounts to 4.5 trillion USD. The minutes also show that the FOMC supports gradually increasing interest rates.

US statistics:

The US ISM non-manufacturing index for March declined to 55.2 (forecast: 57.0, previous reading: 57.6)

The number of new private sector jobs added in March came to 263,000 (forecast: 187,000, previous figure revised from 298,000 to 245,000)

Market expectations:

A lot of speeches are planned for today. Of most interest to traders will be ECB president Mario Draghi's but we shouldn't expect a high level of volatility from it. He is generally cautious in his statements outside press conferences that follow ECB meetings. The market is bracing itself for the US labour market report for March. I've been expecting a breakthrough at 1.0680 for several days now. It's possible that the price will hit 1.0710 before the non-farm payrolls.

Day's news (GMY 3):

  • 09:00 Germany: factory orders (Feb);
  • 10:00 EU: ECB president Draghi's speech;
  • 10:15 Switzerland: CPI (Mar);
  • 10:30 EU: ECB member Prat's speech;
  • 11:10 Eurozone: business activity index in retail trade (Mar);
  • 12:40 EU: ECB governing member Weidmann's speech;
  • 14:30 Eurozone: ECB monetary policy meeting accounts;
  • 14:45 EU: ECB vice president Constancio's speech;
  • 15:30 Canada: building permits (Feb);
  • 15:30 USA: initial jobless claims (Mar 31);
  • 16:30 USA: FOMC member Williams' speech.

EURUSD rate on the hourly. Source: TradingView.

Intraday forecast: low: n/a, high: n/a, close: n/a.

Trading on the Euro on Wednesday closed slightly down. After the FOMC's minutes were published, another reversal candle formed on the daily timeframe. the two hammers on the daily timeframe have formed a double base on the hourly.

The price has been in a sideways trend for the last 4 days. If the FOMC minutes couldn't send the Euro below 1.0600, then it's worth considering a breakthrough of the support zone from 1.0680 to 1.0700. I haven't made a prediction as the price may stay here until Friday's NFP report.

At the time of writing, the trend line has been broken though, which is a bullish signal. When trading get underway in Europe, the price could easily rise. Take a look at the Gann levels on the chart. The ellipses represent intermediate levels at which the price could meet some resistance: 1.0703, 1.0723 and 1.0744.

Positives for the euro ( ):

Fundamental:

( ) 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 from 80 to 60 billion EUR;

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

( ) 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 28/03/17, large speculators on the Chicago Exchange have increased their long and decreased their short positions. Long positions have grown by 1,807 to 160,453 contracts, while short positions have fallen by 9,283 to 167,608 contracts. Net short positions have fallen from 18,245 to 7,155 contracts;

( ) US 10-year bond yields: 2.334% (down 1.05% from 05/04/17);

( ) In Asia, US 10Y bond yields have fallen by 0.92% to 2.335%;

( ) EURGBP (W):  the CCI (20), AO and AC are up;

( )EURGBP (D): the CCI (20) and Stochastic (5,3,3) are up;

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

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

( ) EURUSD (D): the Stochastic (5,3,3) and AC are up;

Negatives for the euro (-):

Fundamental:

(-) Eric Rosengren, president of the Boston Fed, argues that the central bank should raise interest rates every other session, meaning that he expects to see another 3 hikes this year;

(-) FOMC member Williams is envisaging another 2-3 rate hikes this year and isn't ruling out the possibility of even more. The Fed could also start reducing its balance sheet this year, which is earlier than many economists had predicted;

(-) Dallas Fed president Kaplan has said 3 rate hikes in 2017 is his base case;

(-) FOMC member Mester says that the Fed needs to reduce the size of its balance sheet this year;

(-) St. Louis Fed president Bullard has said that the Federal Reserve needs to act quickly on normalising its balance sheet;

(-) According to CME Group's FedWatch Tool, on Wednesday the 5th of April, the probability of a rate hike in May remains 5.3%. The probability in June has risen from 62.1% to 66.6% and in July from 66.8% to 69.1%;

(-) Political risks in Europe (French elections);

Technical factors (short-term):

(-) Small speculators on the Chicago exchange have reduced their long positions by 1,095 to 64,185 contracts and increased shorts by 10 to 63,103 contracts. Net long positions have fallen from 2,187 to 1,082 contracts;

(-) Short/long ratio according to myfxbook as of 7:49 EET: 26%/73%, lots: 10084/28169 (previous day: 10864/35963), positions: 39422/53484 (previous day: 40718/58683);

(-) German 10-year bond yields: 0.250% (down 5.66% from 05/04/17);

(-) EURGBP (M): the AC, AO, CCI (20) and Stochastic (5,3,3) indicators are down;

(-) EURGBP (W): The Stochastic (5,3,3) and CCI (20) are down;

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

(-) EURUSD (W): the Stochastic (5,3,3) is down;

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

Built into the price:

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

(-) 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;

( ) 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;

( ) 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;

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

( ) 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;

( ) ECB member Lautenschläger warns that it's time to prepare for a change in the bank's policy



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Number of comments: 1
  • Liam
    • #

    The euro looks a little bit weaker and the French elections influence on this situation. So, we should just wait what will happen further.