The euro/dollar experienced sharp fluctuations in a range of 150 points on Monday. In the first half of the day, the euro strengthened against the USD to 1.0945 following the publication of business activity data for Germany and the Eurozone. Business activity in December was up.
Inflation in Germany was down, increasing the likelihood of an extension of economic stimulus measures from the ECB. Preliminary German CPI data for December stood at -0.1% MoM, 0.3% YoY (forecasted: 0.2% MoM, 0.6% YoY, previous: 0.1% MoM, 0.4% YoY).
The EUR/USD dropped to 1.0780 at the US session. The euro bulls couldn’t manage to restore their losses after weak US data. The US ISM business activity index fell from 48.6 to 48.2. The Markit version of the indicator fell from 52.8 to 51.2.
Main news of the day (EET):
- 10:55, German labour market data;
- 11:30, UK construction activity;
- 12:00, Eurozone inflation;
- 14:00, New Zealand 155th dairy auction;
- 16:45, ISM (New York) manufacturing index for US.
Investor attention on Tuesday will be on German, UK, New Zealand and Eurozone data. The weekly and daily technical pictures are indicating a further fall for the euro against the US dollar and UK pound.
- Intraday target maximum: 1.0838 (current Asian), minimum: 1.0781, close: 1.0805;
- Intraday volatility for last 10 weeks: 100 points (4 figures).
The euro/dollar has started the new year with fluctuations in all directions. The fall halted at the D3 line (lower limit of MA channel) and the support takes its beginnings from 4th December, 2015. The graphs on the old time frames indicate a fall for the euro. The D3 will be a support.
To define the nearest target for the week, we need to make a channel. Let’s put the 1.1059 and 1.0984 peaks (15th and 28th December) together and stick a parallel line at 1.0802 (17th December minimum). According to the channel at the lower limit, the closest target is 1.0700. My target for Tuesday is 1.0781.
I expect a fall for the euro/dollar to 1.0780/81. Pay attention to the fact that the euro/pound is trading near the support. If there’s a bounce from it to the U1 at 0.7394, it’s unlikely that we’ll see a weakening of the euro against the dollar. It is highly likely, however, that the euro/dollar will shift north to 1.0874.
If the EUR/GBP breaks from the LB and smashes the support, then there’ll be risks that the euro/dollar will update yesterday’s 1.0780 minimum.
The rate has broken from the trend line. The price just needs to strengthen below 1.0795 for the euro bears to open the road south to 1.0518. The daily indicators are showing a fall for the euro. The sellers need to get the price to close below 1.0794 even if it kills them. If the day closes above 1.0800, the oscillator stochastic will invert upwards and the flat will continue.
The sellers are trying to break the 1.0794 support on the weekly. If they manage to do this within two days, we will be heading back to 1.0518 since the stochastic will be intersecting upwards.