On Monday the 20th of March, trading on the euro closed slightly up. A tall upper shadow has formed on the daily candlestick. The exchange rate fell yesterday from a maximum of 1.0777 to 1.0725. What is strange is that the euro depreciated on the back of growth on the EUR/GBP cross and a slide in US bond yields. The low buyer activity seen is surely connected to the televised French presidential debate that took place last night. They're important for the French, who look yet to decide on a favourite candidate.
According to a survey conducted by polling agency Elabe at the request of TV channel BFMTV, in which they asked which of the candidates was "the most convincing", 29% of respondents went for Emmanuel Macron, 20% for Mélenchon, Le Pen and Fillon each got 19% and Hamon got 11%. Experts at the TV station judge Jean-Luc Mélenchon and François Fillon to be the frontrunners in the race.
US president Donald Trump gave a speech at a campaign rally last night, so it's unclear whether the euro's growth in Asia is a response to that, or a belated response to France's televised presidential debate.
On Monday, the euro closed at 1.0739, and in Asia rose to 1.0770. From a technical point of view, the daily and weekly timeframes of the EUR/USD and EUR/GBP pairs give us a mixed picture. It's difficult to say whether or not the euro-bulls will be able to break the 1.0785 support. The current situation could play out in three different ways. First, a break at 1.0785. Second, a rebound from 1.0770. Third, consolidation over the next 2-3 days. In light of this, I haven't tried to make a prediction on the hourly chart.
Day's news (GMT 3):
- 09:45 Switzerland: SECO economic forecasts;
- 10:00 Switzerland: trade balance (Feb);
- 12:30 UK: CPI (Feb), core CPI (Feb), PPI input (Feb), PPI output (Feb), public sector net borrowing (Feb);
- 13:35 USA: Fed's William Dudley speech;
- 14:00 UK: CBI industrial trends survey - orders (Mar);
- 15:30 Canada: retail sales ex autos (Jan), retail sales (Jan); USA: current account (Q4).
EURUSD rate on the hourly. Source: TradingView
Intraday forecast: low: n/a, high: n/a, close: n/a.
A tall upper shadow formed on Monday's daily candlestick, which is a bearish signal. Traders ignored the fall in US bond yields as well as the growth on the EUR/GBP cross. As a result, my calculated target wasn't reached. The euro rate fell to 1.0725, taking its cue from the pound. The British pound weakened against the euro and the dollar after Prime Minister Theresa May announced her intention to trigger Article 50 on the 29th of March, which will officially begin the process of Britain's secession from the EU.
For Tuesday, I don't have any predictions on my chart as I was unable to determine in which direction the price will go. There's a clear sideways trend on the hourly timeframe with two points of contact up top and two down below. The model starting from the maximum of 1.0782 can be regarded as a complete flat. in this case, it's worth anticipating a break at 1.0785 and some movement towards the daily trend line at 1.0840.
If we consider the formation of a W-model, it's also worth considering a rebound and subsequent deprecation of the euro to 1.0666. The final option is consolidation within the range of 1.0700 to 1.0782 over the next few days.
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 came 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;
( ) Ewald Nowotny, a member of the ECB's governing council, has said that the bank could raise the deposit rate before the main refinancing rate;
( ) According to data from 14/03/17, small and large speculators on the Chicago Exchange have increased their long and short positions. Long positions have grown by 11,151 to 148,509 contracts, while short positions have grown by 8,909 to 187,216 contracts. Net short positions have fallen from 58,766 to 38,707 contracts. Small speculators have reduced their short positions by 11,095 to 58,313 contracts. Net long positions have risen by 3,158 contracts.
( ) Short/long ratio according to myfxbook as of 10:30 EET: 78%/21%, lots: 29800/8112 (previous day: 21726/7542), positions: 74869/27286 (previous day: 54996/21436);
( ) US 10-year bond yields: 2.464% (down 1.48% from 20/03/17);
( ) German 10-year bond yields: 0.440% (up 0.92% from 20/03/17);
( ) EURGBP (W): the CCI (20), AO, AC and the Stochastic (5,3,3) are moving upwards. The trend line has been broken through;
( ) EURUSD (M): the Stochastic (5,3,3) is moving upwards;
( ) EURUSD (W): The Stochastic (5,3,3), AO, AC, and CCI (20) are moving upwards;
( ) EURUSD (D): the AO indicator is moving upwards;
Negatives for the euro (-):
(-) According to CME Group's FedWatch Tool on Monday the 20th of March, the probabilities of a rate hike are 6.4%, 58.3% and 64.5% for May, June and July respectively;
(-) Political uncertainty in Europe (French elections and Brexit);
(-) Fed member Evans is expecting 2-3 rate hikes in 2017. The Federal Reserve will make a decision about the next hike in June;
(-) President of the Philadelphia Fed, Harker, announced that the Federal Reserve will continue to gradually increase interest rates throughout 2017;
Technical factors (short-term):
(-) In Asia, US 10Y bond yields have grown by 0.42% to 2.482%;
(-) EURUSD (M): the AO and AC indicators are moving downwards;
(-) EURUSD (D): the AC, Stochastic (5,3,3) and CCI (20) are moving downwards;
(-) EURGBP (D): the AO, AC, CCI (20), and Stochastic (5,3,3) indicators are moving downwards;
Built into the price:
(-) The Ex-Prime Minister of France, Alain Juppe, has ruled himself out of participating in the presidential election;
( ) 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.