Stale Market Analysis from ForexBrokerInc

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EURUSD: Euro struggles to rise above 1.1850. Current 1.1790

The first two European sessions of this week failed to see Euro above the exchange price of 1.1850. It seems that traders are happy to continue selling pullbacks as we get closer to the European Central Bank meeting scheduled for next Thursday, January 22 and the possibility of the adoption of some sort of a QE program. Next week will also see elections in Greece and ECB’s interest rate decision. As there’s not a lot of optimism in Eurozone at present time the pair is likely to test current weekly support levels at 1.1740 and later 1.16440. Should this sentiment change, a break above 1.1850 could see the pair advancing to 1.1950 – a near term resistance caused by last week’s gap.

 

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EURUSD: Euro continues printing new lows vs the greenback

The Euro started new trading week with a drop to 11-year lows against the greenback as the anti-austerity party won Sunday’s elections in Greece.

Why Greeks’ choice to elect the anti-austerity party Syriza matter to the Euro? Well, its party leader Mr. Alexis Tsipras vowed to renegotiate the terms of the Greece’s bailout package received from Troika over the last few years and reverse some of the measures imposed. Although Greece is one of the smallest members of the Euroland it surely will test the model of the EU. As if those negotiations will go ahead with a positive for Greece outcome, then markets could expect similar actions in Portugal, Ireland and Cyprus.

Technically speaking, the pair continues to attract sellers on pullbacks. After making a lower low (1.1097), the pair is currently traded at a lower high (1.1270). Chances are that not breaking 1.1290 would see the pair making a new lower low at around 1.1050 and later targeting weekly support1 at 1.0985. On the other side, a break of 1.1290 could see the pair advancing to 1.1332 – a pivot point for this week.

 

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The euro erased gains against the U.S. dollar on Friday, despite tepid U.S. economic reports as earlier data from the euro zone failed to boost confidence in the bloc's economic recovery.

EUR/USD pulled away from 1.1364, the session high, to hold steady at 1.1308 during U.S. morning trade.

The pair was likely to find support at 1.1223, the high of January 27 and resistance at 1.1421, the high of January 27.

In a revised report, the University of Michigan said its consumer sentiment index ticked down to 98.1 in January from 98.2 the previous month. Analysts had expected the index to remain unchanged this month.

The UoM also said its inflation expectations for the next 12 months rose to 2.5% this month from 2.4% in December.

A separate report showed that the Chicago purchasing managers' index rose to 59.4 this month from 58.8 in December, whose figure was revised up from a previously estimated reading of 58.3. Analysts had expected the index to fall to 57.5 in January.

The data came after Bureau of Economic Analysis said U.S. gross domestic product rose 2.6% in the last quarter of 2014, down from a previous estimate of 3.0% and from a growth rate of 5.0% in the three months to September.

Earlier Friday, Eurostat reported that the euro zone’s unemployment rate ticked down to 11.4% in December from 11.5% the previous month, confounding expectations for the rate to remain unchanged.

In a separate report, Eurostat said that the annual rate of euro zone inflation fell by 0.6% in January, after a 0.2% slip in December. Economists had expected an annual decline of 0.5%.

Core inflation, which strips out volatile measures such as food and energy costs, rose 0.5% on a year-over-year basis, but was still well below the European Central Bank's target of close to, but just under 2%.

In addition, official data showed that Spanish GDP rose 0.7% in the fourth quarter of 2014, above expectations for a 0.6% gain and up from a growth rate of 0.5% in the previous quarter, while another report showed that German retail sales gained 0.2% last month, disappointing expectations for a 0.3% rise.

The euro was also higher against the pound, with EUR/GBP edging up 0.13% to 0.7521.

In the U.K., data showed that U.K. net lending to individuals fell to £2.2 billion in December from a revised £3.1 billion in November.

Data also showed that U.K. mortgage approvals rose by 60,280 last month after a downwardly revised 58,960 increase in November, compared to expectations for a 59,000 rise.

In addition, the U.K. Gfk consumer confidence index improved to 1 this month from minus 4 in December, compared to expectations for a reading of minus 2.

 

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Yet another meeting focusing Greece’s debt situation is to take place in Brussels during today. Eurozone ministers will continue the discussion on the situation in Greece, considering the upcoming expiry of Greece’s current economic stimulus programmer.

If no results to Greece’s financial problems are produced, there is a serious concern that Greece will be headed for a crunch that would force it out of the euro zone. Despite claims that leaving the Eurozone would be better for the Greek people, Mario Draghi, President of ECB refused to discuss the possibility of Greece leaving the single currency. The ministers will also discuss the economic situation in the euro land and will look into EU Commission’s winter forecast, which was published in the beginning of February as well as ongoing economic adjustment programs in Portugal and Cyprus.

As the meeting begins at 2 PM GMT (9 AM ET), it is not clear what time there will be any official announcements from the meeting but it is highly likely that this will move markets.

Technically speaking, EURUSD is traded in a 200 pip consolidation zone for the past 3 weeks with 1.1480 acting as resistance and 1.1280 as current support.

As the Eurozone ministers’ meeting approaches we expect higher volatility during this week with traders focusing on breaking the support at 1.1280, which could then see the pair being traded back in 1.10s zone. On the other hand it should be noted that a solid break and daily close above the resistance at 1.1480 could see the pair advancing to 1.1580 and thus it is imperative that protective measures such as stop orders should be placed when price approaches either boundary of the current consolidation zone.

 

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During today’s session, the US Dollar gradually recovers Thursday’s sharp sell-off as DXY (Dollar Index) continues its momentum towards the psychological level of 100 points.

Given the strength of Euro sellers seen in this quarter of 2015 as well as ongoing political turmoil within the Eurozone, the parity price level seems to be becoming more realistic with each trading day that passes us by. It’s worth mentioning as well that Germany’s 30 year bund yield dropped below 0.75% for the first time ever and the situation is seen as getting “crazier and crazier’.

How long can Euro support its current important technical levels at 1.05 and then 1.0350 before the 1:1 exchange rate?

Looking at the pace of the sell-offs at recent levels at 1.1150 and later 1.08, the 1.05 and 1.035 levels may as well be just holding levels during quieter Asian session before eventually testing 1:1. Having taken fundamental and technical views into consideration it is likely that any corrective movements up will be seen as an opportunity to enter new short positions.

Corrective moves may somehow be limited to price levels at 1.08, but break above would require significant institutional buying, which is highly unlikely to happen so close to 1:1 rate.

 

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The Euro fell to as low as 1.0462 during last Friday’s trade versus the greenback but since then gradually recovered some 70+ points and currently trades at the exchange rate of 1.0538 amid the U.S. Dollar Index touch highs of 100.27 points.

As markets anticipate Wednesday’s FED interest rate decision and monetary policy statement, the current technical setup seems like a good opportunity to continue selling the pair toward 1.0350. Traders should bear in mind 1.0550 as a solid break could see the rate advancing to 1.0650 and later 1.09 (high of last week). In some 8 hours (18:45 GMT) traders will be looking for clues and information about the Eurozone and the single currency as ECB’s President Mario Draghi has planned speech.

Across the English Channel the British Pound fell below an important exchange level of 1.4800 versus the dollar. Only on a few occasions in the past 30 odd years this level gave up and reasons were due to world financial crashes. For that reasons the Sterling comes under a heavy pressure heading towards the Bank of England’s Wednesday fundamental news such as BoE Minutes and its vote on interest rates scheduled for Wednesday at 09:30 GMT. Traders should bear in mind that 1.4800 level as break above could see exchange advancing to 1.4950 short term. However, looking at the recent pace of sell offs in GBPUSD, the rate is more likely to test 1.4580 (a 161.8% extension from the range 1.4950 – 1.5550) where traders would look for other opportunities.

As we expect high volatility this week as the economic calendar is filled with important news releases, we strongly advise to always use protective measures.

 

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Over the last 48 hours markets have recorded remarkable movements that can be connected with a heavy sell-off of the greenback across the major currencies.

Heading towards Wednesday’s FED announcements institutional USD buyers seem to have offloaded their heavy dollar positions, resulting in some 400-500 pip movements across the currency basket.

The anti-USD rally didn’t last long and prove to be another good opportunity to get back into trends and continue buying into the dollar.

Today’s European session have been quite bearish towards the US Dollar and most currencies advanced once again. The US open appears to be limiting early gains and this week is set to finish below early highs.

EURUSD finds a great support at 1.0620 and during next week the pair may find its range between 1.0620 and 1.09. A break above 1.09 would attract Euro buyers till 1.11. On the other side a break below 1.0620 would signal a move towards 1.0460.

 

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EURUSD

The rate of the single currency vs the greenback retraced once again to 1.0750 (a 50% Fibo level from the lows at 1.0460 and recent highs at 1.1040), price that is seen as a key short term support level, and a level that was mentioned by us on during Monday analysis as a next point of stop should 1.0920 give up.

With increasing volumes around 1.0750 we expect fast paced movements before the week ends with the market being likely to break below 1.07 and target 1.0620 to eventually return below 1.05. On the other side a break above 1.08 would signal another bull run and return above 1.10 to eventually test 1.11.

As the volatility increases towards the end of the week we strongly suggest placing SL orders each time you place a trade.

 

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EURUSD

The single currency is set to test key support levels vs the greenback as this week is filled with major economic data releases. During the course of last week, EURUSD tumbled over 450 pips with only a few weak attempts to stop the bear run, which in fact turned into nice trend continuation patterns.

Since the beginning of this week, EURUSD failed to move above 1.0620 and the few attempts to do so have seen during rejections a significant increase in volume and thus suggesting a 1.0620 to be the intra-day resistance. The next very important support level is around the rate of 1.0460. That’s because, technically speaking, this level opens two possibilities. The first likely scenario is to obviously continue with the trend down to the parity level, providing 1.046 and 1.0340 areas are broken as easily and with same pace as previous 1.09 and 1.08. On the other hand (Chart B EURUSD Weekly). The level of 1.0460 can be seen as a double bottom formation, which if valid could see EURUSD advancing to 1.16 as a long term target with major long resistance at 1.1050. Thus, 1.0460 being a significant base for EURUSD expect large movements from there.

Bear in mind the following events scheduled for this week, which will see EURUSD moving large: (server time)

Tuesday: USD Retail Sales 14:30

Wednesday: EUR ECB Interest Rate Decision 13:45 followed by ECB Monetary Statement 14:30

Thursday: USD Initial Jobless Claims and Continuing Jobless Claim 14:30

Friday: EUR CPI reports 11:00, USD CPI reports 14:30 followed by Michigan Consumer Sentiment Index 20:00

We strongly suggest placing SL orders each time you place a trade.

 

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EURUSD retraces from this week’s high at 1.0850 during today’s EU and US session overlap and is set to end the week below 1.0750, cancelling a row of 4 daily consecutive bull runs. The next intraday support level points out at 1.0700, which lays at the lower boundary of this week’s upper channel and this level will see whether there’ll be more upper movements towards 1.10 – 1.11. On the other side a break below 1.0700 would see EURUSD testing 1.0620 and then 1.05.
As traders will be looking to cash in on recent rallies against the US, expect recovery and resumes in the USD trends vs the basket of major currencies next week.