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EUR/USD: market awaits Draghi’s speech

Previous:

On Wednesday the euro/dollar closed down. Before Yellen spoke the euro corrected to the balance line. Afterwards the euro dropped to 1.0624 dollars. The Fed chief announced that the regulator plans to lift the base interest rate several times before 2019. Furthermore, she declined to precise the times and amount by which the rates will be lifted. Yellen noted that the decisions to be taken will depend on the economic indicators in the US. As usual, she manoeuvred around any real indications. Nevertheless, the dollar rose after she spoke.

Market expectations:

On Thursday the ECB meeting and Draghi’s press conference will be at the centre of market participants’ attention. Due to this my forecast only runs to 16:00. After yesterday’s fall, before a decision is put out in the public domain, the euro may well revive to 1.0659 as part of an upward correction. If the strengthening happens fast then we could see the rate hit 1.0675.

Day’s news (GMT 3):

  • 11:15, Swiss December manufacturing price index;
  • 12:00, Eurozone November balance of trade;
  • 15:45, ECB interest rate decision for January;
  • 16:30, Canadian manufacturing sales in November and foreign investor purchases of securities for the month. ECB press conference with Draghi. US construction permits issued in December, January business activeness in the manufacturing sector from the Philadelphia Fed, number of unemployment benefit applications for the week ending 14th January, construction began in December.
  • 19:00, oil and gas reserves for the week ending 14th January.

Technical analysis:

Euro/ rate on the hourly. Source: TradingView dollar

Intraday forecast: minimum: n/a, maximum n/a, close: n/a.

On Wednesday my expectations of the price returning to the balance line came off in full. After Yellen spoke the euro fell to 1.0624 dollars.

The euro rate fell from a 1.0720 maximum by almost 90 degrees. Due to this fall, many sellers closed their short positions. According to current data from myfxbook.com, the split between buyers/sellers is 55%/44%. Short positions are down from 62% to 55%. The ideal relationship would be a flat. Only, today we have Draghi speaking and the ECB meeting.

I never make forecasts after 15:45. In my forecast I expect a correction to 1.0659. If the euro’s rise will be a hasty one, we could see it reach 1.0675. In the triangle I indicated a price movement according to cycles and the pattern from September 2002. It doesn’t have anything to do with Draghi speaking. I made it since it will be interesting to see whether it corresponds with Draghi speaking or not.

On Wednesday the interim trend line was broken. In doing so the mice opened up the road to the trend line at 1.0571. Only, first of all 1.0623 must be passed. I’ve marked out the channel with the arcs.


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