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EUR/USD: Euro expected to continue decline

Previous:

On Wednesday, the Euro closed down against the US dollar. The Euro fell to 1.0882 following the FOMC's meeting.

The US Federal Open Market Committee decided to maintain current interest rates within its range of 0.75% - 1.00%, and the discount rate at 1.50%. However, the US central bank is still committed to raising interest rates incrementally throughout the year.

According to the latest data from CME Group's FedWatch, the probability of a rate hike in June has risen from 66.3% to 75.2% and in July from 70% to 77%. The probability of a hike in September currently stands at 87%.

US statistics:

The ISM non-manufacturing index for April rose to 57.5 (forecast: 55.8, previous reading: 55.2);

The number of new private sector jobs added in the US in April came to 177,000 (forecast: 175,000, previous reading revised from 263,000 to 255,000).

Market expectations:

The FOMC's monetary policy meeting has passed. Now, two more important events remain this week for the Euro. The first is the US jobs report to come out on Friday. the second is the second round of the French presidential eelction.

Given the fact that the dollar strengthened after the Fed's decision to maintain interest rates at their current level, for today (Thursday), I'm going to risk predicting a further slide for the Euro to 1.0860. I doubt there will be much buyer activity leading up to the election. It's unlikely that anyone will want to keep their long positions open over the weekend.

Day's news (GMT 3):

  • 10:55 Germany: Markit services PMI (Apr);
  • 11:00 Eurozone: Markit services PMI (Apr);
  • 11:30 UK: Markit services PMI (Apr), net lending to individuals (Mar), M4 money supply (Mar), mortgage approvals (Mar);
  • 12:00 Eurozone: retail sales (Mar);
  • 14:30 USA: Challenger job cuts (Apr);
  • 15:30 Canada: trade balance (Mar); USA: initial jobless claims (Apr 28), nonfarm productivity (Q1), unit labor costs (Q1), trade balance (Mar);
  • 17:00 USA: factory orders (Mar);
  • 19:30 Eurozone: ECB president Mario Draghi's speech;
  • 23:25 Canada: BoC governor Poloz's speech.

EURUSD rate on the hourly. Source: TradingView.

Intraday forecast: low: 1.0860, high: 1.0905/07, close: 1.0875.

Yesterday, my prediction went up to 21:00 EET. My expectations for the EUR/USD pair leading up to the FOMC's meeting came off in full. From a high of 1.0937, the Euro slid to the 22nd degree at 1.0911. After the FOMC's meeting, the Euro's slide became even more pronounced. The daily candlestick closed at 1.0882. The 45th degree prevented the Euro from sliding any further.

Today, Mario Draghi will give a speech during US trading hours. In general, the only time that Draghi's words have any significant effect on currency markets is during the press conferences that follow ECB meetings, so I won't be paying much attention to today's speech.

Today, I'm expecting buyers to push the price to the 67th degree.

In Asia, the Euro has recovered part of its losses and is currently trading at 1.0897. Buyer activity is low and I reckon that sellers will enter the market at around 1.0905/07. Given that the Stochastic indicator is in the sell zone, the Euro could start sliding from its current level. However, if the hourly candlestick closes above 1.0923, I don't expect to see this slide occur.

Positives for the Euro ( ):

Fundamental:

( ) US president Donald Trump favours a weaker dollar;

( ) French elections: Emmanuel Macron won the first round of voting by a small margin;

( ) S&P has reaffirmed Germany's credit rating at AAA/A-1 with a stable outlook;

Technical (short-term):

( ) Small speculators have increased long positions by 4,253 to 66,753 contracts and short positions by 493 to 61,457 contracts. net-long positions have grown from 3,759 to 5,296 contracts;

( ) According to myfxbook, the Short/Long ratio as of 7:12 EET is 65%/34%, lots: 11825/6342 (previous day: 12511/3679), positions: 36689/20337 (previous day: 41108/12882);

( ) German 10Y bond yields: 0.335% (up 5.34% from 03/05/17);

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

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

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

Negatives for the Euro (-):

Fundamental:

(-) ECB head: revision of ECB's monetary policy not required at present;

(-) On Wednesday, the 3rd of May, according to CME Group's FedWatch, the probability of a rate hike in June has risen from 66.3% to 75.2% and in July from 70% to 77%. The probability of a hike in September currently stands at 87%;

(-) Tension surrounding the situation with North Korea. Increased demand for safe haven assets;

(-) The US Congress has approved a temporary budget, avoiding a government shutdown for the time being. A week's delay will give time for knocking out a draft budget for the rest of the fiscal year (end of September). It became clear on the 1st of May that Republicans and Democrats had settled on a compromise to keep the budget going until the 30th of September;

Technical (short-term):

(-) According to data from  25/04/17, Large speculators on the Chicago Exchange have reduced their long and short positions. There are currently more short positions than longs. Long positions have fallen by 32,054 to 153,394 contracts, while short positions have fallen by 25,030 to 181,340 contracts. Net-short positions have increased from 7,023 to 27,946 contracts;

(-) US 10Y bond yields: 2.322% (up 1.44% from 03/05/17);

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

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

(-) EURGBP (D): AO, AC - down;

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



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