Sive Morten
Special Consultant to the FPA
- Messages
- 18,679
Fundamentals
This week EUR was driven by common economical factors - some news from Davoc, US and EU statistics and ECB meeting. Overall impact on EUR was moderately bearish and it shows real hazard to long-term technical perspective as market is coming to January close. This price level will be of exceptional importance to long-term charts.
The dollar rose to its strongest level of 2020 on Monday after last week’s run of data confirmed that the U.S. economy is holding up well, while China’s yuan briefly hit a new six-month high.Mostly, however, it was another quiet start to the week for currencies, with FX volatility near all-time lows and little in the way of key economic data.
Trading volumes were thin as Lunar New Year approaches in Asia and with U.S markets closed for Martin Luther King day on Monday.
Figures on last week's Friday showed U.S. homebuilding surged to a 13-year high in December. Retail sales also rose and a gauge of manufacturing activity rebounded to its highest in eight months. The strength in the U.S. economy underlines its relative outperformance versus the euro zone, although recent data point to a bottoming out in the European economy, as well as a recovery in China.
“Data released since the previous ECB meeting have been positive and consistent with the slightly more optimistic tone struck by (ECB President Christine) Lagarde in December regarding the economic outlook,” RBC Capital Markets’ currency strategist Adam Cole said.
The euro has failed to benefit much from the more positive noises, however, and the euro/dollar exchange rate is firmly stuck within a tight trading range. China on Friday posted its slowest annual growth figure in almost 30 years, although December data showed revived business confidence and quickening factory output.
Britain’s pound rose against the dollar and the euro on Wednesday as investors debated whether or not the Bank of England would cut interest rates when it meets next week. Financial markets saw less chance on Wednesday that the BoE would trim the current 0.75% rate at its meeting on Jan. 30, after the Confederation of British Industry reported a pick-up in manufacturers’ sentiment.
Money-market pricing suggests investors see around a 50% chance of a quarter-point rate cut, down from 70% on Monday, Refinitiv data showed.
Sterling was rising beforehand, after data released on Tuesday showed the British economy created jobs at its strongest rate in nearly a year in the three months to November.
“Business confidence is likely to continue to improve, in other words, an interest rate cut at the end of January wouldn’t be absolutely necessary,” said Marc-André Fongern, head of FX research at MAF Global Forex. “The pound sterling remains attractive.”
“I struggle to make a strong case for a January rate cut,” said Kallum Pickering, a senior economist at Berenberg in London. “Much of the data, which is weak, is pre-election, so what will matter more to the Bank of England is the PMI data on Friday.”
Indeed, take a look at CME BoE Watch Tool. It shows that sentiment has changed drastically since last week. While a week before it was 72% expectation that BoE will cut the rate, now it stands just at 55%:
Source: cmegroup.com
At the same time for the truth sake - it seems sentiment chances very fast here. Month ago it was just 5% expectation of rate cut. So, we'll see what will happen on Thursday, 30th of January.
The dollar rose against the euro on Thursday after the European Central Bank held interest rates steady and launched a broad review of its policy that was likely to see new President Christine Lagarde redefine the ECB’s main goal and how to achieve it.
“The ECB left policy and guidance unchanged at today’s meeting, with the ECB still arguing that the overall situation justifies the negative interest rate environment and still stressing that it remains ready to adjust all measures if necessary, with the balance of risks still tilted to the downside,” Natascha Gewaltig, director of European economics at Action Economics, said in a note.
The euro zone’s central bank has fallen short of its inflation target of just under 2% for years, even after Lagarde’s predecessor, Mario Draghi, launched increasingly aggressive stimulus measures.
“We will not leave any stone unturned and how we measure inflation is clearly something we need to look at,” Lagarde said.
“Basically, what she is saying is that they are reassessing some of the tools they have been using for basically a decade to booster up inflation to no avail,” said Minh Trang, senior FX trader at Silicon Valley Bank in Santa Clara, California.
The World Health Organisation (WHO) said on Thursday it was “a bit too early” to declare a new coronavirus a global health emergency as China put millions of people on lockdown amid an outbreak that has killed 18 people and infected more than 630.
The dollar rose to a near eight-week high against the euro on Friday as lukewarm European PMI data added to the broader market conviction that European central bank policymakers will maintain a loose monetary policy for the near future.
Euro zone business activity remained lackluster with the IHS Markit’s Euro Zone Composite Flash Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, holding at 50.9 in January but missing the median prediction in a Reuters poll for 51.2.
That followed an earlier PMI from Germany, Europe’s largest economy, which showed the private sector gained momentum.
“The move partly reflected a phase of broader euro weakness following the release of the flash Eurozone January PMI data showing a miss in the composite headline, at 50.9, despite a firm German reading,” Jonathan Coughtrey, managing director, at Action Economics said in a note.
The survey data comes a day after the European Central Bank did not make any policy change, standing by its pledge to keep buying bonds and, if needed, cut interest rates until euro zone inflation headed back to its goal.
Friday’s data added to expectations that a rate hike is ruled out for the rest of the year, with Nordea analysts expecting a 10-basis-point increase only in the second quarter of 2023.
Though there are no expectations for a rate hike from the U.S. Federal Reserve as well for the rest of the year, the 160-basis-point plus interest rate differential in benchmark interest rates between the euro zone and United States is expected to drive the single currency lower.
The euro is set for its worst start to the year in five years, down 1.5% so far this month, and trading at its lowest levels since Dec. 2.
Now we turn to most interesting things...
World stocks celebrated the China-U.S. trade truce by speeding into a New Year rally. But European auto shares have crashed out on signs they will be first in the firing line if a trade war erupts with Washington. President Donald Trump’s latest threat to raise tariffs on car imports from the EU sent shivers down the spines of executives, who are already struggling with tough regulation, slowing demand in key markets and competition with electric vehicles.
No surprise then that European auto shares .SXAP skidded towards their biggest weekly fall since October, shedding 3.5%, even as the pan-European equity index returned to record highs. In fact, auto shares have decoupled from Germany’s DAX index since late-2019, hitting 10-year lows relative to that benchmark.
Making matters worse is another profit warning from Daimler, and a Citi ratings downgrade for Renault. Interestingly, auto sector earnings are expected grow almost 10% in Q4. But investors are bracing for nasty surprises.
BOE Meeting
Britain leaves the European Union next week but the day will be little more than symbolic, given January 31 only marks the start of an 11-month period during which a new trade agreement will have to be thrashed out with the bloc.
Of greater interest arguably, is Thursday’s Bank of England meeting — Mark Carney’s last as governor. The question is whether the BoE will join central bank peers in cutting interest rates. Economic growth and inflation took a hit from 3-1/2 years of Brexit uncertainty so a string of dismal data and dovish policymaker comment saw expectations for a cut swiftly build.
But money markets, having at one point priced a 70% chance of a quarter-point rate reduction, have trimmed those expectations to around 50%. Latest indicators, covering the period after the Dec. 12 election, suggest improving confidence. Sterling around $1.31, is in the middle of its trading range so far in 2020 - where it heads next hinges on the BOE’s decision and forecasts for whether the economy will find more fuel when it starts a new life outside the EU.
-UK business improves after election, weakening case for rate cut, PMIs suggest
-Pound drops as rate cut still possible despite improving data
FED Watch list
The Fed must steer its first policy meeting of the 2020s between Scylla and Charybdis: U.S. stock indexes at nosebleed levels against Trumpian election-year pressure for lower rates.
The fed funds target will certainly be left in its 1.5% to 1.75% range on Wednesday; the central bank will want to see how the three cuts from 2019 are percolating through the economy. Also, considering fed funds spent the first half of the past decade near zero, there is barely room to cut more, without raising alarm about negative rates, deflation and asset prices.
A more immediate question is how long the Fed lets its banking system interventions run, now that the year-end has passed without any repo market turmoil. Its overnight operations will continue until at least mid-February but a debate is underway whether to establish a standing repo facility for banks. Investors will also watch for comments on the Fed’s pivot back to balance sheet expansion.
President Trump is likely to deliver his verdict too. Advance fourth quarter GDP lands Thursday — 2.1% growth is expected — and Trump might repeat his argument that were it not for Fed policy tightening, growth would be near 4%.
-Fed’s Harker says officials learned lessons from repo turmoil, still mulling standing facility
-Fed on hold, but will financial risks matter?
CFTC Data
Speculators snapped a six-week streak to add to their net long bets on the U.S. dollar in the latest week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday. The value of the net long dollar position was $7.76 billion in the week ended Jan. 21, up from $6.64 billion last week. The rebound comes after speculators’ long U.S. dollar position last week shrank to the smallest since the second week of June 2018.
On EUR currency, in turn, we see some contraction of net short position, but it has happened before ECB meeting and positive US data. It would be interesting to see on CFTC numbers on 1st week of the February when ECB, Fed meeting and US GDP numbers will be priced in...
Source: cftc.gov
Charting by Investing.com
So, guys - although it is sad to talk but it seems that year has started on negative scenario that we were worry on. Recall our discussions by the end of 2019 when we've talked on possible scenarios in 2020. We said in our December 23rd report - "Thus if we take a look on EUR/USD perspective from this point of view - it seems that some downside trend should be in 2020, if our suggestion on tariffs will take place", and "We've considered possible bullish scenario, which could take place if we're wrong about US tariffs on EU and if EU economy will show at least some improving. Right now it seems none of these conditions are filled. EU economy shows poor statistics by far, ECB can't offer something new that could change situation and just follow the same tactic of bond buying programme. "Eye of Sauron" now turns to Gondor, sorry, to EU when "phase 1" of slaving China is done.
Besides, whether we want it or not but long lasting effect of EU and UK divorce will impact economies of both countries. This is only at first glance and on the background of victorious euphoria seems that situation will turn to better. Yes it will (may be), but not immediately. First it becomes worse, because when you're breaking something that was working for decades - it could just disappear without any consequences. There are a lot of problems - borders, taxation, quotas for minerals, fish, economy space division etc.
For example, finance minister Sajid Javid stoked fears about weak ties between Britain and the European Union following the country’s departure from the bloc.
In an interview with the Financial Times on Saturday, Javid said Britain would not commit to sticking to EU rules in post-Brexit trade talks.
That is a threat to businesses that want to ease cross-border checks with the EU once the transition period following Britain’s departure on Jan. 31 terminates at the end of the year. A spokesman for Prime Minister Boris Johnson said on Monday that although there will be equivalence of rules at first after Brexit, Britain does not want alignment and would pursue a free trade agreement instead.
“It’s about the UK diverging from Europe, and that would necessarily result in limiting access to European markets,” said RBC Capital Markets chief currency strategist Adam Cole. “Markets are taking that negatively.”
It means that all negative factors that we were warned about by the end of 2019 - now are coming to life. It makes upside perspective of EUR doubtful in long-term. Besides, the drama is that these negative events are coming at decisive moment for EUR from technical point of view.
Technicals
Monthly
All stuff mentioned above makes impact on charts, even on long term. Take a look what we have on monthly. Previously we already talked about bearish grabber that has been formed in December. But this grabber had dual nature and could be treated just occasion as December has closed at MACDP line. Now is January - it is just one week to its close and now price stands at the bottom of the month and below MACDP line as well. Appearing of the grabber means that EUR should drop below 1.08 lows.
On coming week we will get US GDP preliminary data and Fed meeting. Fed comments and good statistics could make a decisive long-term impact on EUR/USD rate. From pivot points frame work EUR has tested YPP but failed to break it up, which is bearish sign. Second, as grabbers suggest drop below 1.08 level - this is also Yearly Pivot Support 1, and breaking YPS1 means downside trend on monthly chart, back to 1.03 lows because EUR has no additional stoppers below 1.08 - no valuable targets, oversold, no significant Fib levels.
Currently market also is just completed upside harmonic pullback (pink lines on the chart) and retreats, suggesting that existed downside tendency is still valid. That's being said, monthly picture looks bearish now and tells us to stay aside from any long-term bullish positions on EUR. Also we have to keep an eye on coming events as they will have major impact on situation (although somehow I suggest that they will confirm status quo).
Weekly
Here EUR is also gradually destroying bullish scenario. Despite that MACD trend still stands bullish - price action gets more and more signs of bearish dynamic pressure, as it stands flat, instead of going up.
In fact, EUR has the only chance to reverse situation back on bullish road - it has to show immediate upside rebound up from 1.10 area with direct action to 1.1450. As we do not have friendly fundamental background for that - odds stand low of this scenario. If EUR will drop below "C" point lows - downside action will go with acceleration back to 1.08 first and even lower then.
Daily
EUR accurately has completed our Friday's target, reaching daily OP and 5/8 Fib support level, but it seems that it is just a beginning. On Mon-Tue we could get some silence and bounce action as major events will start on Wed with Fed meeting and then BoE, and GDP release. As 1.1015 is Agreement support area, some bounce probably should happen there. But overall context remains bearish, weekly wedge has been broken down as well, thus, we probably consider chances on short entry, using potential upside pullback in the beginning of the week.
AB-CD pattern shows acceleration and tail closing on "CD" leg which is also bearish sign. Next target here, on daily is XOP around 1.0925 area
Intraday
Here is our XOP is completed as well. On intraday chart we will keep an eye on 1.1080 - 1.1115 area for potential short entry. As overall background is USD supportive and market is not at oversold, pullback probably should be moderate.
Conclusion:
Long-term EUR/USD perspective is turning to negative way as neither of positive events have happened and even vice versa - EU statistics is poor, while D. Trump threaten Europe by tariffs. Technical picture starts reflect this new trend as well and multiple potentially bearish signs appear on the long-term charts.
Next week we follow the major tendency and will search chances to go short around 1.11 area. While market probably will be relatively quiet in the beginning of the week - activity should return on Wednesday, when Fed meeting starts.
This week EUR was driven by common economical factors - some news from Davoc, US and EU statistics and ECB meeting. Overall impact on EUR was moderately bearish and it shows real hazard to long-term technical perspective as market is coming to January close. This price level will be of exceptional importance to long-term charts.
The dollar rose to its strongest level of 2020 on Monday after last week’s run of data confirmed that the U.S. economy is holding up well, while China’s yuan briefly hit a new six-month high.Mostly, however, it was another quiet start to the week for currencies, with FX volatility near all-time lows and little in the way of key economic data.
Trading volumes were thin as Lunar New Year approaches in Asia and with U.S markets closed for Martin Luther King day on Monday.
Figures on last week's Friday showed U.S. homebuilding surged to a 13-year high in December. Retail sales also rose and a gauge of manufacturing activity rebounded to its highest in eight months. The strength in the U.S. economy underlines its relative outperformance versus the euro zone, although recent data point to a bottoming out in the European economy, as well as a recovery in China.
“Data released since the previous ECB meeting have been positive and consistent with the slightly more optimistic tone struck by (ECB President Christine) Lagarde in December regarding the economic outlook,” RBC Capital Markets’ currency strategist Adam Cole said.
The euro has failed to benefit much from the more positive noises, however, and the euro/dollar exchange rate is firmly stuck within a tight trading range. China on Friday posted its slowest annual growth figure in almost 30 years, although December data showed revived business confidence and quickening factory output.
Britain’s pound rose against the dollar and the euro on Wednesday as investors debated whether or not the Bank of England would cut interest rates when it meets next week. Financial markets saw less chance on Wednesday that the BoE would trim the current 0.75% rate at its meeting on Jan. 30, after the Confederation of British Industry reported a pick-up in manufacturers’ sentiment.
Money-market pricing suggests investors see around a 50% chance of a quarter-point rate cut, down from 70% on Monday, Refinitiv data showed.
Sterling was rising beforehand, after data released on Tuesday showed the British economy created jobs at its strongest rate in nearly a year in the three months to November.
“Business confidence is likely to continue to improve, in other words, an interest rate cut at the end of January wouldn’t be absolutely necessary,” said Marc-André Fongern, head of FX research at MAF Global Forex. “The pound sterling remains attractive.”
“I struggle to make a strong case for a January rate cut,” said Kallum Pickering, a senior economist at Berenberg in London. “Much of the data, which is weak, is pre-election, so what will matter more to the Bank of England is the PMI data on Friday.”
Indeed, take a look at CME BoE Watch Tool. It shows that sentiment has changed drastically since last week. While a week before it was 72% expectation that BoE will cut the rate, now it stands just at 55%:
Source: cmegroup.com
At the same time for the truth sake - it seems sentiment chances very fast here. Month ago it was just 5% expectation of rate cut. So, we'll see what will happen on Thursday, 30th of January.
The dollar rose against the euro on Thursday after the European Central Bank held interest rates steady and launched a broad review of its policy that was likely to see new President Christine Lagarde redefine the ECB’s main goal and how to achieve it.
“The ECB left policy and guidance unchanged at today’s meeting, with the ECB still arguing that the overall situation justifies the negative interest rate environment and still stressing that it remains ready to adjust all measures if necessary, with the balance of risks still tilted to the downside,” Natascha Gewaltig, director of European economics at Action Economics, said in a note.
The euro zone’s central bank has fallen short of its inflation target of just under 2% for years, even after Lagarde’s predecessor, Mario Draghi, launched increasingly aggressive stimulus measures.
“We will not leave any stone unturned and how we measure inflation is clearly something we need to look at,” Lagarde said.
“Basically, what she is saying is that they are reassessing some of the tools they have been using for basically a decade to booster up inflation to no avail,” said Minh Trang, senior FX trader at Silicon Valley Bank in Santa Clara, California.
The World Health Organisation (WHO) said on Thursday it was “a bit too early” to declare a new coronavirus a global health emergency as China put millions of people on lockdown amid an outbreak that has killed 18 people and infected more than 630.
The dollar rose to a near eight-week high against the euro on Friday as lukewarm European PMI data added to the broader market conviction that European central bank policymakers will maintain a loose monetary policy for the near future.
Euro zone business activity remained lackluster with the IHS Markit’s Euro Zone Composite Flash Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, holding at 50.9 in January but missing the median prediction in a Reuters poll for 51.2.
That followed an earlier PMI from Germany, Europe’s largest economy, which showed the private sector gained momentum.
“The move partly reflected a phase of broader euro weakness following the release of the flash Eurozone January PMI data showing a miss in the composite headline, at 50.9, despite a firm German reading,” Jonathan Coughtrey, managing director, at Action Economics said in a note.
The survey data comes a day after the European Central Bank did not make any policy change, standing by its pledge to keep buying bonds and, if needed, cut interest rates until euro zone inflation headed back to its goal.
Friday’s data added to expectations that a rate hike is ruled out for the rest of the year, with Nordea analysts expecting a 10-basis-point increase only in the second quarter of 2023.
Though there are no expectations for a rate hike from the U.S. Federal Reserve as well for the rest of the year, the 160-basis-point plus interest rate differential in benchmark interest rates between the euro zone and United States is expected to drive the single currency lower.
The euro is set for its worst start to the year in five years, down 1.5% so far this month, and trading at its lowest levels since Dec. 2.
Now we turn to most interesting things...
World stocks celebrated the China-U.S. trade truce by speeding into a New Year rally. But European auto shares have crashed out on signs they will be first in the firing line if a trade war erupts with Washington. President Donald Trump’s latest threat to raise tariffs on car imports from the EU sent shivers down the spines of executives, who are already struggling with tough regulation, slowing demand in key markets and competition with electric vehicles.
No surprise then that European auto shares .SXAP skidded towards their biggest weekly fall since October, shedding 3.5%, even as the pan-European equity index returned to record highs. In fact, auto shares have decoupled from Germany’s DAX index since late-2019, hitting 10-year lows relative to that benchmark.
Making matters worse is another profit warning from Daimler, and a Citi ratings downgrade for Renault. Interestingly, auto sector earnings are expected grow almost 10% in Q4. But investors are bracing for nasty surprises.
BOE Meeting
Britain leaves the European Union next week but the day will be little more than symbolic, given January 31 only marks the start of an 11-month period during which a new trade agreement will have to be thrashed out with the bloc.
Of greater interest arguably, is Thursday’s Bank of England meeting — Mark Carney’s last as governor. The question is whether the BoE will join central bank peers in cutting interest rates. Economic growth and inflation took a hit from 3-1/2 years of Brexit uncertainty so a string of dismal data and dovish policymaker comment saw expectations for a cut swiftly build.
But money markets, having at one point priced a 70% chance of a quarter-point rate reduction, have trimmed those expectations to around 50%. Latest indicators, covering the period after the Dec. 12 election, suggest improving confidence. Sterling around $1.31, is in the middle of its trading range so far in 2020 - where it heads next hinges on the BOE’s decision and forecasts for whether the economy will find more fuel when it starts a new life outside the EU.
-UK business improves after election, weakening case for rate cut, PMIs suggest
-Pound drops as rate cut still possible despite improving data
FED Watch list
The Fed must steer its first policy meeting of the 2020s between Scylla and Charybdis: U.S. stock indexes at nosebleed levels against Trumpian election-year pressure for lower rates.
The fed funds target will certainly be left in its 1.5% to 1.75% range on Wednesday; the central bank will want to see how the three cuts from 2019 are percolating through the economy. Also, considering fed funds spent the first half of the past decade near zero, there is barely room to cut more, without raising alarm about negative rates, deflation and asset prices.
A more immediate question is how long the Fed lets its banking system interventions run, now that the year-end has passed without any repo market turmoil. Its overnight operations will continue until at least mid-February but a debate is underway whether to establish a standing repo facility for banks. Investors will also watch for comments on the Fed’s pivot back to balance sheet expansion.
President Trump is likely to deliver his verdict too. Advance fourth quarter GDP lands Thursday — 2.1% growth is expected — and Trump might repeat his argument that were it not for Fed policy tightening, growth would be near 4%.
-Fed’s Harker says officials learned lessons from repo turmoil, still mulling standing facility
-Fed on hold, but will financial risks matter?
CFTC Data
Speculators snapped a six-week streak to add to their net long bets on the U.S. dollar in the latest week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday. The value of the net long dollar position was $7.76 billion in the week ended Jan. 21, up from $6.64 billion last week. The rebound comes after speculators’ long U.S. dollar position last week shrank to the smallest since the second week of June 2018.
On EUR currency, in turn, we see some contraction of net short position, but it has happened before ECB meeting and positive US data. It would be interesting to see on CFTC numbers on 1st week of the February when ECB, Fed meeting and US GDP numbers will be priced in...
Source: cftc.gov
Charting by Investing.com
So, guys - although it is sad to talk but it seems that year has started on negative scenario that we were worry on. Recall our discussions by the end of 2019 when we've talked on possible scenarios in 2020. We said in our December 23rd report - "Thus if we take a look on EUR/USD perspective from this point of view - it seems that some downside trend should be in 2020, if our suggestion on tariffs will take place", and "We've considered possible bullish scenario, which could take place if we're wrong about US tariffs on EU and if EU economy will show at least some improving. Right now it seems none of these conditions are filled. EU economy shows poor statistics by far, ECB can't offer something new that could change situation and just follow the same tactic of bond buying programme. "Eye of Sauron" now turns to Gondor, sorry, to EU when "phase 1" of slaving China is done.
Besides, whether we want it or not but long lasting effect of EU and UK divorce will impact economies of both countries. This is only at first glance and on the background of victorious euphoria seems that situation will turn to better. Yes it will (may be), but not immediately. First it becomes worse, because when you're breaking something that was working for decades - it could just disappear without any consequences. There are a lot of problems - borders, taxation, quotas for minerals, fish, economy space division etc.
For example, finance minister Sajid Javid stoked fears about weak ties between Britain and the European Union following the country’s departure from the bloc.
In an interview with the Financial Times on Saturday, Javid said Britain would not commit to sticking to EU rules in post-Brexit trade talks.
That is a threat to businesses that want to ease cross-border checks with the EU once the transition period following Britain’s departure on Jan. 31 terminates at the end of the year. A spokesman for Prime Minister Boris Johnson said on Monday that although there will be equivalence of rules at first after Brexit, Britain does not want alignment and would pursue a free trade agreement instead.
“It’s about the UK diverging from Europe, and that would necessarily result in limiting access to European markets,” said RBC Capital Markets chief currency strategist Adam Cole. “Markets are taking that negatively.”
It means that all negative factors that we were warned about by the end of 2019 - now are coming to life. It makes upside perspective of EUR doubtful in long-term. Besides, the drama is that these negative events are coming at decisive moment for EUR from technical point of view.
Technicals
Monthly
All stuff mentioned above makes impact on charts, even on long term. Take a look what we have on monthly. Previously we already talked about bearish grabber that has been formed in December. But this grabber had dual nature and could be treated just occasion as December has closed at MACDP line. Now is January - it is just one week to its close and now price stands at the bottom of the month and below MACDP line as well. Appearing of the grabber means that EUR should drop below 1.08 lows.
On coming week we will get US GDP preliminary data and Fed meeting. Fed comments and good statistics could make a decisive long-term impact on EUR/USD rate. From pivot points frame work EUR has tested YPP but failed to break it up, which is bearish sign. Second, as grabbers suggest drop below 1.08 level - this is also Yearly Pivot Support 1, and breaking YPS1 means downside trend on monthly chart, back to 1.03 lows because EUR has no additional stoppers below 1.08 - no valuable targets, oversold, no significant Fib levels.
Currently market also is just completed upside harmonic pullback (pink lines on the chart) and retreats, suggesting that existed downside tendency is still valid. That's being said, monthly picture looks bearish now and tells us to stay aside from any long-term bullish positions on EUR. Also we have to keep an eye on coming events as they will have major impact on situation (although somehow I suggest that they will confirm status quo).
Weekly
Here EUR is also gradually destroying bullish scenario. Despite that MACD trend still stands bullish - price action gets more and more signs of bearish dynamic pressure, as it stands flat, instead of going up.
In fact, EUR has the only chance to reverse situation back on bullish road - it has to show immediate upside rebound up from 1.10 area with direct action to 1.1450. As we do not have friendly fundamental background for that - odds stand low of this scenario. If EUR will drop below "C" point lows - downside action will go with acceleration back to 1.08 first and even lower then.
Daily
EUR accurately has completed our Friday's target, reaching daily OP and 5/8 Fib support level, but it seems that it is just a beginning. On Mon-Tue we could get some silence and bounce action as major events will start on Wed with Fed meeting and then BoE, and GDP release. As 1.1015 is Agreement support area, some bounce probably should happen there. But overall context remains bearish, weekly wedge has been broken down as well, thus, we probably consider chances on short entry, using potential upside pullback in the beginning of the week.
AB-CD pattern shows acceleration and tail closing on "CD" leg which is also bearish sign. Next target here, on daily is XOP around 1.0925 area
Intraday
Here is our XOP is completed as well. On intraday chart we will keep an eye on 1.1080 - 1.1115 area for potential short entry. As overall background is USD supportive and market is not at oversold, pullback probably should be moderate.
Conclusion:
Long-term EUR/USD perspective is turning to negative way as neither of positive events have happened and even vice versa - EU statistics is poor, while D. Trump threaten Europe by tariffs. Technical picture starts reflect this new trend as well and multiple potentially bearish signs appear on the long-term charts.
Next week we follow the major tendency and will search chances to go short around 1.11 area. While market probably will be relatively quiet in the beginning of the week - activity should return on Wednesday, when Fed meeting starts.
.
