Stale Market Analysis from ForexBrokerInc

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Despite recent claims that UK economy is doing better relative to other European economies, hence have to pay additional 1.7 billion Pounds into the European Union budget, the Pound can’t seem to be finding its strength to rise vs Dollar and other major currencies.

Will it get worse?

German Chancellor Angela Merkel warned the UK Prime Minister David Cameron that she would rather see the UK leave the EU than compromise over the principle of free movement and that Britain is approaching ‘the point of no return’.

Such strong statement by the German Chancellor will never have a good impact on the British Pound, nor in fact on the Euro.

Investors will surely be watching the proceedings of the UK Prime Minister in the coming days.

Technically speaking as of Monday morning, GBPUSD is at the psychological resistance level of 1.60. Still however, the pair is traded in the bearish rectangle and as long the market does not break and stay above the psychological level of 1.6000 in the coming hours and days, we should expect further movement to the down side. Targeting 1.5750 area.

 

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US: Higher interest rates are on the horizon – market experts claim.

As the US Dollar Index, measure of the value of the greenback relative to a basket of foreign currencies remain strong and penetrating the 88 points zone, markets bet that interest rates are set to rise next year. Investors’ hope for an interest rates hike should be cooled down as monetary authorities want to be sure recovery remains sustained stepping into 2015.

Following the FED minutes meeting, the single currency EURO tested 1.26 level resistance vs the greenback but immediately turned down being unable to break the still forming bearish rectangle. The H4 SMA200 was tested on a couple of occasions in the past 2 trading months and yet again proved to be an important resistance.

Following Bank of England’s minutes meeting the British Pound gained some strength retracing from multi-year low at 1.56 to 1.57 only to be put back in the original downtrend minutes after FED’s meeting. Our outlook on both EURUSD and GBPUSD remain the same as no factors can be seen to be buying into the two pairs.

There are still a few upcoming events this week traders should look for. Today we are going to find out the CPI figures and Initial Jobless Claims for US. This week will end with European Central Bank President Mario Draghi’s speech.

 

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EURUSD: More dark clouds over the single currency

The Eurozone noted a poor result in yet another industry, gathering more dark clouds over the single currency. As ECB’s policymakers struggle to boost growth and drive up low inflation, the manufacturing growth stalled in November as new orders fell at the fastest pace in 19 months.

November’s PMI (50.1) is barely above the level that separates growth from contraction, and is a sign that there is little prospect for improvement in December. As market participants don’t expect the European Central Bank to alter its already very loose policy (ECB meeting scheduled for this Thursday), including the interest rate to remain at all-time low 0.05%, the single currency may be exposed to further selling offs.

What to expect? Our view remains bearish with level 1.2360 on watch as any major moves below will open path for 1.20-1.21 zone.

 

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The European Central Bank decided to hold off on implementing new stimulus program and kept its interest rates at 0.05% and will reassess its achievements in first quarter of 2015.

Despite quite dovish outlook on the Eurozone with services sector continues to slow, alongside it are contracting inflation pressures the euro area economy and interest rates at lowest levels seen, the single currency remains under strong pressure ahead of Friday’s NFP numbers.

The single most traded pair rose from 1.23 to 1.2450 within hours after ECB’s statement and higher than expected US Initial jobless claims only for the move to attract sellers and halve Euro’s gain shortly after.

There may be various reasons for such sharp increase, from traders taking part of their profits and thus driving price up to traders pushing the price up only to trigger higher volumes at a better price, nevertheless it doesn’t change the overall outlook on the Eurozone and the single currency.

Technically speak, the pair is currently traded at Weekly’s support level with next target to be in area of 1.2280.

 

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Over the last week we learnt a lot about current and forecasted situation in the Euro zone. As the picture isn’t painted in favour of the single currency, the pair dropped by some 240 points and finished the trading week in the area of 1.2280. Euro zone’s economic calendar for this week is light, with no real major reports scheduled for release except Friday’s Employment and Industrial production change.

Will no news for Euro zone be a good news? It doesn’t look like that’s the case for the single currency. As market participants digest recent Euronews the pair is likely to find a resistance at its weekly Pivot Point at 1.2354 and first support at 1.22. A strong and accepted break of 1.22 will more likely see the pair falling to level last seen over 2 year ago at 1.21.

 

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The single currency traders enjoyed a +230 point movement after reaching recent low at 1.2250 during early trade last week versus the greenback. The 200 period simple moving average on H4 chart proved yet again to be a good resistance price. As European banks took 129 billion of cheap loans, figure released last Thursday during the TLTRO auction, the result indicates that the Eurozone needs a QE program to beat the deflationary pressure. What does it mean? Well, market participants can simply look into the recent history and see that QE programs tend to decrease value of country’s currency. In simple words, a long term euro-bearish factor.

What to expect this week? As market participants look forward to Wednesday’s FED interest rate decision and policy statement, the single currency sentiment remains in hands of bears. As Eurozone’s PMI (Tuesday) and CPI (Wednesday) forecasted numbers remain low, it doesn’t look as the sellers will let euro break and stabilize above 1.25 versus the dollar.

Levels to watch: 1.2360, 1.2250 as valid breakouts will open the path to 1.20 on the downside. And, on the upside a break of 1.25 may see the market move towards 1.2750.

 

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As greenback remains close to a five-year peak versus a basket of currencies on expectations for a US rate hike next year, will market participants take euro’s negative sentiment into 2015?

The single currency enjoyed some 50+ bounce from its year low of 1.2220 early in the European session. Despite the overall bearish trend remaining firm in place, it’s certainly worth mentioning and looking into a few key technical indicators that some may consider as current low to be THE low.

The well-known and respected 200 SMA, this time on Monthly chart, provided a vital support for EURUSD in the middle of 2010 and again in 2012 giving euro the driving seat for the next 22 months of trading. The same Monthly 200 SMA at 1.2220 was tested last Friday, December 19.

Triple Divergence – since early October, the Daily chart with MACD is forming a triple divergence, a very rare occurrence. Thus, 1.2220 can be considered as make or break point for EURUSD.

As despite it being a Christmas celebration week, and expected low volume, the economic calendar is filled with important news mainly concerning the US Dollar that should add liquidity to the market.

Tuesday: Annualized GDP (Q3), Durable Goods Orders (Nov), New Home Sales (Nov), Personal Spending (Nov)

Wednesday: MBA Mortgage Applications, Initial Jobless Claims and Continuing Jobless Claims.

 

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As trading volumes are expected to remain light this week the single currency hovers close to two-year lows against the greenback. Political instability in Greece comes to front news again as today Greece faces a vote in parliament later today that will decide whether its leading coalition can get enough votes to elect a president. The Euro could take off of its lows providing ruling coalition’s candidate Stavros Dimas receives 180 votes in parliament to become president as then Greece can continue negotiations with its creditors.

Technically speaking, the last several trading days showed that market participants are happy to sell EURUSD on pullbacks. The momentum of the strong dollar is likely to continue in the last days of the year. As the pair is traded (1.2190) near the resistance at 1.2220, a break could see the pair heading towards 1.24 (H4SMA200). The same resistance can attract sellers and lead the pair falling to 1.2050 to test 2012’s low.

 

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EURUSD: The single currency sees the New Year at 30 month low vs the greenback

Euro plunged as far as 1.2035 at the opening of the first European session in 2015.

The president of ECB Mario Draghi said the risk of the central bank not fulfilling its mandate of preserving price stability was higher now than 6 months ago, and confirmed readiness to act early this year should it become necessary. He also urged politicians to implement necessary reforms and reduce tax burdens to support the Eurozone recovery that is “fragile and uneven”.

According to IMF COFER data publish recently, the Euro share of global reserves dropped by 1.5 points to 22.6% indicating one of the largest quarterly declines in the share ever. If this trend continues, there may be potential for a faster move lower in the Euro in early 2015. Investors continue to watch developments in Greece, where parliament was formally dissolved on Wednesday after Prime Minister Antonis Samaras failed to become a head of state, casting the country’s international bailout into doubt. Parliamentary elections were set for January 25, almost a year and a half before the current coalition’s term was due to end.

 

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EURUSD: Euro plunges to nine-year low vs. the greenback​

The single currency fell to 1.1860 vs. the greenback in early hours of Asian session on Monday, printing a nine-year low amid speculation that the European Central Bank is getting closer to starting large-scale QE program like the US, UK and Japanese central banks have done in recent times. On top of that, the German government believe that the Eurozone would now be able to cope with a Greece exit if that proved to be necessary, reported by Der Spiegel on Saturday.

A correction is certainly underway but the upside should stay limited as traders are happy to continue selling any bounces that were seen in recent weeks.

As its first policy meeting of the year approaches, the ECB is now under strong pressure to ease its policy as soon as January 22, while the FED prepares to raise interest rates from a record low near zero.

Two major market participants Citigroup and Barclays are now predicting a rate for end-2015 at 1.07, a level not seen since April 2003.

CURRENT: 1.1950.

Technically speaking the pair found resistance at 1.1980. As this week is filled with major fundamental news, most forecasts are against the euro, closing and staying over the gap at 1.20 seems to be an unlikely scenario. Take a closer look at the markets on Wednesday as the Eurozone will announce its Unemployment rate together with its CPI. Unemployment data will also come on the same day from Germany followed by FOMC Minutes later that day and of course Friday’s NFP numbers.