On Monday the 29th of January, trading on the euro closed down. The main driver for this decline was the rise of the US dollar as well as bond yields.
The US dollar index, which measures the dollar against a basket of major currencies, rose to 89.61, while US 10Y bond yields jumped to 2.7282%.
The euro spent the European session trading above 1.2385 before dropping to 1.2337 in the US session. This is where some technical factors from the daily timeframe came into play (two candlesticks with long wicks). By the day’s close, the euro had recovered to 1.2390.
Day’s news (GMT 3):
- 09:30 France: GDP (Q4).
- 10:00 Switzerland: trade balance (Dec).
- 11:00 Switzerland: KOF leading indicator (Jan).
- 12:30 UK: net lending to individuals (Dec), M4 money supply (Dec), mortgage approvals (Dec).
- 13:00 Eurozone: GDP (Q4), economic sentiment indicator (Jan), consumer confidence (Jan), industrial confidence (Jan), business climate (Jan).
- 16:00 Germany: harmonised index of consumer prices (Jan).
- 17:00 USA: S&P/Case-Shiller home prices indices (Nov).
Fig 1. EURUSD hourly chart. Source: TradingView
In Asia, the euro is trading slightly down. The greenback is showing mixed dynamics against the majors. The euro crosses are showing a similar picture.
I reckon that the dollar’s rise could slow down today. Trader attention will be focused on European data; the preliminary CPI data from Germany as well as GDP data from both France and he Eurozone. Today also marks the beginning of the FOMC’s two-day meeting. Markets are expecting interest rates to be maintained at 1.25% - 1.50%.
In my forecast, I expect to see the euro drop to 1.2352 followed by a jump to 1.2400 as part of an upwards correction. Sellers shouldn’t let buyers get any further than the LB line, which currently runs through 1.2408, or else buyers will turn the trend in their favour and restore the euro to 1.2450. After the dollar’s collapse last week, its potential for growth hasn’t been completely exhausted. It’s in a position to correct itself until the 1st of February.