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    EUR/USD: Fair value 1.09

    The EUR/USD is in a decline as we have seen the greenback rally  over the last four days against other major currencies. There has been a strong slide in commodities and with the FED suggesting there may be a rate rise in April, this is what is behind the US Dollar's strength.

    It seems like the FED have taken a different tune in regards to interest rates. Last week the FED was dovish and stated that the number of interest rate rises for 2016 will drop from four to two citing risks posed by weaker global growth and financial market turmoil. This week San Francisco Fed President John Williams and Atlanta Fed Dennis Lockhart made similar comments about a possibility of an interest rate rise in April.

    We have also seen in the US that New Home Sales rose in February to a 512,000 annual pace and the January figures were revised to 502,000 from a previous 494,000. These figures indicate to us that there is still continued strength in the US housing market.

    Crude oil inventories smashed analysts forecast with the EIA report showing a build of 9.37M against the forecast of 3.09M. Crude price have now jumped back below the $40.00 level. The large increase in inventory puts storage concerns back on investors' minds. In the last 12 months crude has failed to break above the 200-day moving average as it's approached it on three occasions but has failed to break through signalling the rally since February may be running out of steam.

    The EUR/USD has fallen for the last four days and is in the process of creating a double top formation and it looks poised to return to the area of consolidation at around 1.09. This is the area where traders think that the currency is at fair value, as shown by the volume profile.

    On the 18th December 2015 where saw an Ultra High Volume bar on the EUR/USD, which signifies to me that this price area will act like a magnet and will be continually be retested. If we see continued strength in the US Dollar and a rate hike by the FED in April, the 1.09 area will be where price may go to, its fair value.

    File under: crude, crude oil, EIA, EUR/USD, FED, federal reserve, interest rates, New Home Sales, rates, USD


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