On Tuesday, trading on the euro closed in negative territory. The price corrected by around 61.8% after a rally from 1.0525 to 1.0714. During the US session, the euro weakened against the dollar to 1.0600. The EUR/USD broke the support at 1.0628 as the euro index slid (euro sales on the crosses) and US 10Y bond yields rose slightly.
Yesterday, the two-day meeting of the FOMC began. Their decision regarding interest rates will be announced at 21:00 EET. It's widely expected that the US Federal Reserve will raise rates by 0.25%. Given that the market is already prepared for this, participants will be looking to Janet Yellen's press conference and the central bank's economic forecasts, including any indication about future rate hikes. When such events are taking place, I don't make predictions about the currency market.
Day's news (GMT 3):
- 11:15 Switzerland: producer and import prices (Feb);
- 12:30 UK: claimant count rate (Feb), ILO unemployment rate (Jan), average earnings including bonus (Jan), average earnings excluding bonus (Jan);
- 13:00 Eurozone: employment change (Q4);
- 15:30 USA: CPI (Feb), CPI core (Feb), retail sales (Feb), retail sales ex autos (Feb), NY Empire State Manufacturing Index (Mar);
- 17:00 USA: NAHB housing market index (Mar);
- 17:30 USA: EIA crude oil stocks change (Mar 10);
- 21:00 USA: Fed interest rate decision;
- 23:00 USA: total net TIC flows (Jan), net long-term TIC flows (Jan).
EURUSD rate on the hourly. Source: TradingView
Intraday forecast: low: n/a, high: n/a, close: n/a.
The EUR/USD closed down on Tuesday. Trading on the instrument closed at around the 90th degree. This is not a significant support level for the single currency, so the formation of a V-model from the minimum to the 112th degree is still likely as we await the results of the FOMC's meeting. There is no bullish divergence between the price and the AO indicator.
I tend not to make forecasts in anticipation of such major news from the central banks. Here, we can only construct various scenarios as to how the market will react to the decision, and we can gather our thoughts from there.
On the hourly chart, I've marked the Gann levels from a low of 1.0600 and the 1.0585 level. Cyclical analysis suggests that quotes will rise from their current level, while patterns show this happening from the 112th degree at 1.0585. Personally, I find cycles to be more telling than patterns. Given that the Stochastic is currently up, but has now reversed downwards, buyers will be able to renew the minimum, so brace yourselves for a slide.
Before the Fed's decision is announced, I'd like to see the euro trading within a range of 1.0635 - 1.0645. If in the end, the Fed decides not to raise interest rates, the euro will rise above 1.0750.
Positives for the euro ( ):
( ) US president Donald Trump favours a weaker dollar;
( ) The threshold for acceptable US government debt of 20.1 trillion USD may be reached by March this year. This will create headaches for new US president Donald Trump. A new law on the debt ceiling will come into force on the 16th of March 2017;
( ) The Greek government has made some progress in its talks with international creditors on the second stage of their reform program;
( ) Head of the ECB, Mario Draghi, has hinted that the central bank may not need to provide any further stimulus to revitalise Europe's economy. From April to December 2017, the ECB will reduce their monthly assets purchases to 80 to 60 billion EUR;
( ) ECB bosses have discussed the possibility of raising interest rates before the QE program comes to an end;
( ) US 10-year bond yields have fallen to 2.597% (down 1.1% from 14/03/17);
( ) EURGBP (W): the CCI (20), AO, AC and the Stochastic (5,3,3) are moving upwards. the trend line has been broken through;
( ) EURGBP (D): the AO is moving upwards;
( ) EURUSD (M): the Stochastic (5,3,3) is moving upwards;
( ) EURUSD (W): The Stochastic (5,3,3), AO, AC, and CCI (20) have reversed upwards;
( ) EURUSD (D): the AO indicator is moving upwards. The trend line has been broken through;
Negatives for the euro (-):
(-) According to CME Group's FedWatch Tool, as of Tuesday the 14th of March, the probability of a rate hike in March is 93.0%, 93.5% in May, and 97.1% in June;
(-) Political uncertainty in Europe (French elections and Brexit);
Technical factors (short-term):
(-) According to data from 07/03/17, large speculators on the Chicago Exchange have increased their long and decreased their short positions. Long positions have fallen by 5,404 to 137,358 contracts, while short positions have grown by 8,820 to 196,124 contracts. Net short positions have grown from 44,542 to 58,766 contracts.
(-) Long/short ratio according to myfxbook as of 7:30 EET: 39%/60%, lots: 17037/25360 (previous day: 21002/16534), positions: 44302/56475 (previous day: 54808/42583);
(-) German 10-year bond yields: 0.455% (down 9.22% from 14/03/17);
(-) EURUSD (M): the AO and AC indicators are moving downwards;
(-) EURUSD (D): the Stochastic (5,3,3), AC and CCI (20) indicators are moving downwards, a pin bar has formed;
(-) EURGBP (D): the AC, CCI (20), and Stochastic (5,3,3) indicators are moving downwards;
Built into the price:
(-) President of the Philadelphia Fed, Patrick Harker, has hinted at a rate hike in March;
(-) President of the Dallas Fed, Kaplan, says that it's better to raise rates sooner rather than later;
(-) President of the San Francisco Fed, John Williams, says that March is a good time for the FOMC to seriously consider a rate hike;
(-) FOMC member Lael Brainard says that the US economy is growing, and that a rate hike would soon be appropriate;
(-) Head of the FOMC, Janet Yellen, has said that interest rates might be raised in March;
(-) Head of the Fed in Richmond, Lacker, has said that losing control over inflation could prove very costly;
(-) Vice-president of the Federal Reserve, Stanley Fischer, echoes his colleagues' comments about rate hikes;
(-) Ex-Prime Minister, Alain Juppe, has ruled out running for the French presidency;
(-) US federal interest rates to be raised by 0.25%;
( ) François Bayrou, leader of the "Democratic Movement" party, has ruled out running for the presidency and thrown his weight behind independent candidate Emmanuel Macron;
( ) Marine Le Pen has had her EU parliamentary immunity from prosecution lifted for political reasons.