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EUR/USD: euro could go either way

Previous:

On Wednesday, trading on the euro closed down and the British pound closed slightly up. There were some fluctuations in both directions on the pairs at 17:40 EET when an act of terrorism was committed in London. A car on Westminster bridge drove onto the pavement, hitting a number of pedestrians as it made its way to the parliament building. 5 people have been confirmed dead, including the assailant, who was shot by police, and another 40 were injured.

The pound slid to 1.2423 in the aftermath of the attack, while the EUR/GBP cross rose to 0.8700. On the back of euro purchases on the cross, the EUR/USD rate was able to renew the daily maximum at 1.0825. When the assailant was killed, the EUR/GBP cross fell, bringing the EUR/USD pair with it, which slid to 1.0790. The GBP/USD restored to 1.2490.

Market expectations:

The euro/dollar has returned to the balance line. At the time of writing, the euro is trading at 1.0793. On the hourly timeframe, the technical picture is bullish, so in the first half of the day, I'm expecting to see the price restore to around 1.0820.

At the beginning of the European session, the ECB bulletin could affect the dynamics of the currency pair.

At 15:45 EET, Janet Yellen is set to speak. It's currently unclear whether or not she plans to aid the weakening dollar after raising interest rates. She usually strikes a neutral tone, giving markets little sign of what is to come.

Day's news (GMT 3):

  • 10:00 Germany: Gfk consumer confidence survey (Apr)
  • 12:00 Eurozone: ECB economic bulletin;
  • 12:15 UK: MPC member Broadbent's speech;
  • 12:30 UK: retail sales (Feb);
  • 14:00 UK: CBI distributive trades survey - realised (Feb);
  • 15:30 USA: initial jobless claims (Mar 17);
  • 15:45 USA: Fed's Yellen to speak;
  • 17:00 USA: new home sales (Feb);
  • 18:00 Eurozone: consumer confidence (Mar);
  • 19:30 USA: FOMC member Kashkari's speech;
  • 20:00 Switzerland: SNB member Andréa Maechler's speech.

EURUSD rate on the hourly. Source: TradingView.

Intraday forecast: low: n/a, high: n/a, close: n/a.

After renewing the maximum on Wednesday, the EUR/USD rate returned to the balance line lb. Euro-bulls came under pressure from the EUR/GBP cross after the terrorist attack in London. The general technical picture on the hourly timeframe suggests a strengthening euro. My forecast goes up to 17:00 EET. I'll make a forecast for the rest of the day this evening. The price failed yesterday to correct by 45 degrees. Today, the 45th degree is below the trend line. Although my forecast is expecting the price to restore to 1.0820, the 1.0777 level could be tested during the Asian session.

If the price doesn't rebound upwards from 1.0777, there is a high probability of it moving towards the 1.0747 level (67th degree). Looking at the indicators on the daily and weekly timeframes, the situation is ambiguous. It will be a bad sign for buyers if the hour closes lower than 1.0780. Traders are unsure what can be used as a driving force behind price changes.

Positives for the euro ( ):

Fundamental:

( ) 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;

Technical (short-term):

( ) 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 07:02 EET: 81%/18%, lots: 31371/7227 (previous day: 39575/6876), positions: 73834/28068 (previous day: 90115/21436);

( ) US 10-year bond yields: 2.410% (down 0.25% from 22/03/17);

( ) 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 and AC indicators are moving upwards;

Negatives for the euro (-):

Fundamental:

(-) According to CME Group's FedWatch Tool on Wednesday  the 22nd of March, the probability of a rate hike in May remains 6.4%. The probability in June has fallen from 54% to 49.6% and in July from 60.8% to 57.1%;

(-) 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):

(-) German 10-year bond yields: 0.407% (down 11.32% from 22/03/17);

(-) In Asia, US 10Y bond yields have risen by 0.53% to 2.409%;

(-) EURUSD (M): the AO and AC indicators are moving downwards;

(-) EURUSD (D): the 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.


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