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EURUSD: support broken

Previous:

Trading on the Euro on Monday closed 6 pips lower than it did on Friday. Trading was calm due to national holidays in China, the USA and UK. In the first half of the day, the Euro corrected to 1.1190, and in the second, returned to the support at 1.1160.

Market expectations:

Since the 22nd of May, buyers have been defending the range from 1.1160 to 1.1170. Sellers shifted this support as trading opened in Asia. The Euro fell against the dollar by 0.36% to 1.1122 (-41). Media outlets around the world are reporting that the Euro's slide is the response to an article published in the German tabloid Bild, saying that Greece may opt out of the next bailout payment unless their debt burden is reduced. Greece has warned that if a deal on a new bailout is blocked during talks on the 15th of June, it would plunge the Greek economy further into recession. The technical picture on our currency pair looks to signal some further downwards movement to around 1.1090.

Day's news (GMT 3):

  • 09:00 Germany: import price index (Apr);
  • 10:00 Switzerland: KOF leading indicator (May);
  • 15:00 Germany: CPI (May);
  • 15:30 Canada: current account (Q1), raw material price index (Apr), industrial product price (Apr). USA: CPI (Apr), personal spending (Apr), personal income (Apr);
  • 16:00 USA: S&P/Case-Shiller home price indices (Mar).

EURUSD rate on the hourly. Source: TradingView

Intraday forecast: low: 1.1091, high: 1.1147, close: 1.1103.

Trading closed above 1.1160 on Monday. In such a thin market, buyers had the strength to push the price up 22 degrees from the low of 1.1161. In Asia, sellers shifted the support and drove buyers towards the 112th degree at 1.1122.

A pin bar has formed on the weekly timeframe and an M-model or double top has formed on the daily timeframe. For these, the target is in the region of 1.1069. Buyers that insured their long positions with put options with a strike price of 1.1200, fearing a weakening Euro, did not do so in vain. Taking the premium into account, these options will become profitable below 1.1132 level.

For Tuesday, I'm expecting the Euro to fall to the 135th degree at 1.1091. I'm expecting renewed Euro sales from the 22nd degree at 1.1147. The trend line from 1.1236 runs through this level. If pressure on the Euro increases from the EUR/GBP cross, the Euro will fall against the dollar without any corrections.

Positives for the Euro ( ):

Fundamental:

( ) The minutes from the FOMC's last meeting indicate that committee members have agreed to hold off raising interest rates in order to determine whether or not the current economic slowdown is temporary;

( ) US president Donald Trump favours a weaker dollar;

( ) Political tensions in the USA;

( ) German chancellor Angela Merkel: the Euro is to weak because of the ECB's ultra-loose monetary policy;

Technical (short-term):

( ) According to data from 23/05/17,  large speculators on the Chicago exchange have increased their long positions while reducing short ones. Long positions have increased by 7,883 to 170,864 contracts. Short positions have fallen by 18,406 to 105,284 contracts. Net-long positions have risen by 26,289 to 65,580 contracts;

( ) Small speculators have increased their long positions by 2,875 to 75,441 contracts. Short positions have fallen by 1,707 to 61,308 contracts. Net-long positions have increased by 4,583 to 14,133 contracts;

( ) According to myfxbook, the Short/Long ratio as of 6:58 EET is 72%/27%, lots: 21571/8194 (previous day: 21983/6631), positions: 57314/25625 (previous day: 58611/20066);

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

( ) EURGBP (D): AO - up;

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

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

Negatives for the Euro (-):

Fundamental:

(-) ECB head: revision of ECB's monetary policy not required at present. On the 10th of May, he added that the bank is in no hurry to raise interest rates or to halt its asset purchasing program;

(-) As of Monday, the 29th of May, according to CME Group's FedWatch, the probability of a rate hike in June  has fallen from 88.8% to 84.2%, in July from 89.4% to 85.0% and in September from 92.3% to 89.6%;

Technical (short-term):

(-) German 10Y bond yields: 0.298% (down 9.14% from 29/05/17);

(-) US 10Y bond yields: 2.250% (no change from 29/05/17);

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

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

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

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

Built into the price:

(-) 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;

( ) Emmanuel Macron has been sworn in as the new president of France;

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



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