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EUR/USD: euro consolidating under resistance

Previous:

On Wednesday, trading on the euro closed up. Over the whole day, the single currency rose against the dollar from 1.0730 to 1.0746. Against the backdrop of the weakening of the American dollar, investors ignored the rise in US bond yields, as well as the fall of the euro/pound cross. The euro fell against the pound by 0.75% to 0.8507. The dollar may weaken further due to the uncertainty surrounding Donald Trump’s intentions with regards to his tax and budget plans.

Market Expectations:

In Asia, the euro restored to 1.0766. At the time of writing, one euro sells for 1.0758 USD. For Thursday I’ve decided not to make a forecast given that the market is ignoring the rise in US bond yields. The market could go either way, it looks to be 50/50. the price may go up, following the pound, and it could see a correction at around 1.0711, subsequently rising to 1.0676. The cross looks to be gearing towards a 50 point drop, but there is support at 0.8450. If the euro doesn’t weaken with the cross, then it should break through to 1.0775 in its correctional phase. The faster the price returns to 1.0720, the higher the probability of the euro falling to 1.0676.

Day's news (GMT 3):

  • 10:00 Switzerland - trade balance sheet for December. Germany - Gfk consumer happiness index for January;
  • 12:30 UK - preliminary data for GDP change in the 4th quarter of 2016, the number of mortgage approvals for December according to BBA and the gross value added to the service sector in November;
  • 14:00 UK - realised sales from CBI in January
  • 16:30 USA - number of initial applications for unemployment benefits for 16-22 of January, figures for foreign trade in December and preliminary data on the volume of wholesale inventories for December;
  • 17:45 USA - preliminary data from the PMI index on the service sector for January
  • 18:00 USA - Sales in the primary housing market in December, index of leading indicators from the Conference Board for December.

Technical Analysis:

EUR/USD rate on the hourly. Source: TradingView

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

The single currency against the general weakening of the American dollar is staying around its one-week high. From a low of 1.0711, the pair has bounced by 45 degrees. As I've already written above, the reason for the fall in the dollar is unclear given that US bond yields continue to rise. We should be seeing either a reduction in bond yields, or the dollar strengthening. This irregularity may be down to Trump.

Over three days of trading, a resistance for the euro has formed at 1.0775. For today and yesterday, cyclical analysis indicates a weakening of the euro. On the cross the single currency will fall, and its pairing with the American dollar is showing a sideways trend.

As for the resistance, everything is clear. The supports are at 1.0715 (45 degrees), 1.0700 (bottom channel line) and 1.0690 (67 degrees). Today I'm not making a forecast. If the situation becomes clearer, then I'll revise it within a day. The merchant ratio for this pair stands at 72%. As you all know, the market is moving against the crowd, and if it declines, it won't be very profitable for merchants.


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