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Forex market review: (26/09/17)

During his speech yesterday at the European parliament, ECB president Mario Draghi accredited the euro’s rise since the beginning of the year to the marked improvement in the Eurozone’s economic situation. The ECB head stressed that the bank’s ongoing ultra-loose monetary policy was a significant contributor to recent economic growth. Draghi also emphasised that the regulator’s asset-purchasing program has turned out to be very effective. The ECB is expecting 2.2% percent growth in 2017, 1.8% in 2018, and 1.7% in 2019.

Day’s news (GMT 3):

  • 02:50 Japan: BoJ monetary policy meeting minutes.
  • 3:00 New Zealand: ANZ business confidence (Sep).
  • 17:00 USA: new home sales (Aug).
  • 19:45 USA: Fed’s Yellen speech.

In the second half of the day, Janet Yellen is set to speak in Cleveland on the subject of “inflation, uncertainty, and monetary policy”. Volatility on the dollar could increase in the short term during the speech.

I’d also like to add that, due to the sharp tone of comments coming from both the Pentagon and Donald Trump’s administration directed towards North Korea, gold, the Swiss franc, and the Japanese yen have been showing some chaotic intraday behaviour at times over the last few days.

EUR/USD

On the 4-hour timeframe (H4), the EURUSD pair is attempting a breakout of the trend line:

From my point of view, the trend on the H4 timeframe will only be broken if the EURUSD renews the “key base” of the upwards trend, which is at 1.1680. The trend is still upwards for now, although there aren’t any buy signals.

On the hourly timeframe (H1), the EURUSD pair is testing the lower regions of its range:

There aren’t any buy signals on H1 either.

In fact, if we switch to the 30-minute timeframe, there’s the potential for the formation of a downwards trend:

It’s important to note that, as of now, the upwards trend on H4 is still intact, as is the range on H1, so it would be very risky to bet on a downwards trend on the basis of the M30 timeframe.

At the time of writing, the EURUSD is trading at 1.1851.

USD/CHF

The USDCHF currency pair is continuing to fluctuate around the downwards trend line on the daily timeframe (D1):

The USDCHF pair is currently unable to break away from the trend. I believe that the possibility of this happening will increase if, on the monthly timeframe, for September, we get a bullish engulfing of June’s, July’s and August’s candlesticks. For this to happen, the month needs to close at 0.9720 or higher:

If we get a bullish engulfing pattern for September, this will limit the USDCHF pair’s possibilities for growth. For now, I’m maintaining my long position on the USDCHF pair with a Stop Loss at 0.9390.

At the time of writing, USDCHF is trading at 0.9689.



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