On Monday the 16th of April, trading on the euro closed up. The euro started rallying as trading got underway in Europe. The main reason for this was the universal decline of the US dollar, brought about by America’s military action in Syria.
Despite this, markets opened relatively peacefully. One thing I don’t understand is why Asian market participants didn’t start buying gold, CHF, or JPY after the airstrike occurred. Later, as the Europeans entered the market, they started shorting the dollar. Retail sales data from the US wasn’t enough to provide support to the greenback.
With Syria dealt with, President Trump once again took to Twitter to accuse Russia and China of playing a “currency devaluation game”. He could have saved himself the trouble; everyone knows that Russia and China is to blame for everything in the world. After rising to 1.2394, the euro stabilised against the dollar around 1.2380.
Day’s news (GMT 3):
- 11:30 UK: claimant count change (Mar), ILO unemployment rate (Feb), average earnings (Feb).
- 12:00 Germany: ZEW economic sentiment (Apr).
- 12:00 Eurozone: ZEW economic sentiment (Apr).
- 15:30 Canada: Canadian portfolio investment in foreign securities (Feb), manufacturing shipments (Feb).
- 15:30 USA: building permits (Mar), housing starts (Mar).
- 16:15 USA: industrial production (Mar), FOMC member Williams speech.
- 17:00 USA: Fed’s Quarles speech.
- 18:00 USA: FOMC member Harker speech.
Fig 1. EURUSD hourly chart. Source: TradingView
Yesterday’s predictions came off perfectly. Trading in Europe pushed the euro up towards 1.24. At the time of writing, the euro is trading at 1.2388 against the dollar.
What can we expect from markets today?
There are plenty of important events in today’s economic calendar. In Asia, the dollar is trading down against the yen, pound, and euro, while trading up against the rest of the majors.
All of the euro crosses have made gains except for EURJPY. This means that our main pair could renew yesterday’s high of 1.2394 as trading in Europe opens. The hourly cycles suggest that the euro is set to decline for the rest of the day. The LB balance line will be at 1.2358 throughout the day. It’s to this level that I expect trading on our pair to drop today.
On the current hour, the trend line runs through 1.2340. The 45th degree is sitting at 1.2338. These two levels are strengthening each other. It’s not worth considering a short position on the euro until London exchanges open. Before we do, we need some cues from the crosses.
If the euro produces a breakout of the 1.24 mark, we can forget about shorting the euro at all today. Buyers will push the rate up to 1.2420. Aside from the crosses, their position is also being bolstered by the decline in US bond yields.