On Tuesday, the EURUSD instrument closed 156 pips up. Firstly, the euro rose across the market after Mario Draghi’s speech at the ECB forum in Portugal. He painted the recovery of the European economy in a relatively positive light. He talked about the need to adjust some of the parameters of the bank’s monetary policy, but clarified that this wouldn’t amount to it being tightened.
Next, the US dollar continued its slide as Janet Yellen, the Chair of the US Federal Reserve, gave a speech in London. She didn’t say anything new. She repeated that interest rate hikes would be gradual and that the Fed would try to avoid destabilising markets. The president of the Philadelphia Fed, Patrick Harker, also spoke in London and also seems to favour just one more rate hike this year. As such, we can be fairly certain that we won’t see interest rates go up again at least until September. The euro, as such, has decided to venture north.
Day’s news (GMT 3):
- 09:00 Switzerland: UBS consumption indicator (May);
- 11:00 Switzerland: ZEW survey – expectations (Jun);
- 11:00 Eurozone: M3 money supply (May), private loans (May);
- 15:30 USA: goods trade balance (May), wholesale inventories – prelim (May);
- 16:30 Various: speeches from the governors of the Bank of Canada (Steven Poloz), Bank of England (Mark Carney), the Bank of Japan (Haruhiko Kuroda) and ECB president Mario Draghi;
- 17:00 USA: pending home sales (May);
- 17:30 USA: EIA crude oil stocks change (23 Jun);
- 21:15 Canada: BoC deputy governor Lynn Patterson’s speech.
EURUSD rate on the hourly. Source: TradingView.
Intraday forecast: low: 1.1330 (22 degrees), high: 1.1384 (225 degrees), close: n/a.
Mario Draghi helped Euro bulls remove the protective stop levels on short positions at 1.1230, opening the way towards 1.13. After Janet Yellen’s speech, the rate stood firmly above 1.13.
The euro rate has restored to the U3 line and has been moving with it for the last 14 hours. The last time the euro reached this level was on the 16th of May this year. Before retreating to the balance line, the price could keep following the U3 line for the next 37 to 40 hours in the form of a sawtooth pattern (look at the price dynamics from the 16-19th of May).
On Tuesday, the upper boundary of the channel was broken through on the daily timeframe. So that you understand, the channel is formed from three values: H – 1.1264 (22/05/17), H – 1.1285 (02/06/17), L – 1.1119 (20/06/17). The upper boundary ran through 1.1320 yesterday.
Judging by the fact that there hasn’t been a rebound from the U3 line since it was reached; buyers have taken 1.1475 as the next target (extension of the channel line on the weekly timeframe). Buyers will meet some resistance on the way at 1.1442, which may stop them from advancing further. In any case, 1.1475 is the highest the euro can currently go.
Based on current buyer activity, I’m forecasting a rebound to the 22nd degree at 1.1329, followed by growth to the 225th degree at 1.1384. The price could exit upwards on yesterday’s euphoria without rebounding.
If, in the end, a rebound does begin during Europe’s session, then we should take note of how the price behaves around 1.1329 and look at what might be forming on the 5-minute and 15-minutes timeframes. The rebound might turn out to be stronger and go as far as the 45th degree at 1.1303. In such a case, it’s impossible to say exactly where the price will stop and a new rally will start.
If traders start selling dollars across the market, and the EURGBP cross grows, we could see the EURUSD hit 1.1445 today.