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EUR/USD: Monday against Friday

Previous:

Trading on the EUR/USD currency pair closed in the red on Friday. The Euro fell on the back of contradictory data from the US. In March, the US created twice fewer jobs than they had forecasted and the figures for January and February were revised downwards. At the same time, unemployment fell by 0.2% to 4.5%.

98,000 new jobs were created in the US in March outside the agricultural sector, just over half the forecasted 180,000. The figure for February was revised down from  235,000 to 219,000 and for January from 238,000 to 216,000. The cumulative downwards revision for the two months came to 38,000. The January figure was revised up last month from 227,000 to 238,000.

The participation rate stayed at 63% while unemployment came down from 4.7% to 4.5% (forecast: 4.7%, previous reading: 4.7%). The index for average hourly earnings in the US came to 0.2% (forecast: 0.2%, previous reading revised from 2.0% to 0.3%).

The Euro grew by 45 points in response to the low NFP figures. The news' effect on the market turned out to be rather inconsequential. The Euro had lost all its gains by the end of the session, falling to 1.0580 on the back of rising US bond yields.

Market expectations:

In Asia, the single currency has renewed its minimum against the greenback. At the time of writing, the Euro is selling for 1.0584 against a minimum of 1.0570. I don't do market analyses on Mondays. After payrolls day, my forecast always looks to movements against Friday's. The target for recovery is 1.0617.

Day's news (GMT 3):

  • 11:30 Eurozone: Sentix investor confidence (Apr);
  • 15:15 Canada: housing starts (Mar);
  • 16:00 EU: ECB member Constancio's speech;
  • 17:00 USA: labor market conditions index (Mar);
  • 23:10 USA: Fed's Yellen speech.

EURUSD rate on the hourly. Source: TradingView.

Intraday forecast: low: 1.0570, high: 1.0617, close: 1.0606.

On Friday, after the support at 1.0630 was broken, the Euro fell to the 90th degree. This isn't a particularly important support/resistance level, so we need to be ready for a renewed minimum at 1.0555.

Given that the price is trading around trend line, and that today is Monday, the 90th degree could provide a bullish signal. On Mondays, after some impulsive movement, I always look for movement against Friday's. My forecasted target is on the balance line at 1.0617.

As quotes recover, it's worth keeping an eye on 1.0596 (22 degrees) level. According to the trend, we could see some renewed selling of the Euro from here given that sellers have lowered the price below the trend line. We'll find out whether or not the breakthrough was false as the daily candlestick closes. If the day closes higher than 1.0595, then the breakthrough was false, if lower, it was real. If the price rebounds from the 22nd degree, there is a risk of it going towards the 112th degree.

There is one important moment. The trend line was broken through on the daily timeframe for US 10Y bonds. This means that if the breakthrough on the EUR/USD is a real one (close below 1.0595), wave analyses will revise their targets to below 1.0340 as they would consider the three-wave upwards correction from the 3rd of January's minimum complete.

There are no important events planned in Europe today. Late tonight, head of the Federal Reserve, Janet Yellen, will make a speech. Any incautious remarks about interest rates could weigh negatively on the Euro.

Positives for the euro ( ):

Fundamental:

( ) Bundesbank president, Jens Weidmann, has stressed that the ECB needs to bring an end to its QE program earlier than planned;

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

( ) 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;

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

Technical (short-term):

( ) Small speculators have increased their long positions by 1,181 to 65,366 contracts. Short positions have been reduced by 3,261 to 59,842 contracts. Net-long positions have grown from 1,082 to 5,524 contracts;

( ) EURGBP (W):  CCI (20) - up;

( )EURGBP (D): CCI (20), Stochastic (5,3,3), AC, AO - up;

( ) EURUSD (M): Stochastic (5,3,3), AO, AC, CCI (20) - up;

( ) EURUSD (W): AO, AC - up;

( ) EURUSD (D): AC - up;

Negatives for the euro (-):

Fundamental:

(-) Head of the ECB - revision of monetary policy not required for the moment;

(-) 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 Friday the 7th of April, the probability of a rate hike in May remains 5.3%. The probability in June has fallen from 70.9% 67.2% and in July remains 73.8%;

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

Technical factors (short-term):

(-) According to data from 04/04/17, large speculators on the Chicago exchange have reduced their long and short positions. long positions have fallen by 4,506 to 155,947 contracts, while short positions have fallen by 1,314 to 166,294 contracts. Net-short positions have grown from 7,155 to 10,347 contracts;

(-) Short/long ratio according to myfxbook as of 7:02 EET: 21%/78%, lots: 3399/12390 (previous day: 9256/32004), positions: 11662/29566 (previous day: 35806/64580);

(-) German 10-year bond yields: 0.234% (down 8.59% from 07/04/17);

(-) US 10-year bond yields: 2.382% (up 1.53% from 07/04/17);

(-) In Asia, US 10Y bond yields have fallen by 0.54% to 2.386%;

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

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

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

(-) EURUSD (D): Stochastic (5,3,3), AO, CCI (20) - 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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