Eur/usd - page 259
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On yesterday session EURUSD initially fell but found enough buying pressure at 1.1097 to turn around and closed near the high of the day, close to a daily resistance at 1.1232. A break to the upside of the daily resistance at 1.1232 would suggest another push higher to the next daily resistance at 1.1459. Today in most countries is Bank holiday due to the Labor Day so we may expect light trading volumes.
EUR/USD forecast for the week of May 4, 2015
The EUR/USD pair broke higher during the course of the week, breaking above the 1.10 level. On top of that, we even broke slightly above the 1.12 level, which is significant resistance. However, towards the end of the week it looks as if the euro rally is starting to fade off a little bit. With that, we have to wait into we break above the 1.15 handle in order to buy this pair for the longer term. We are much more comfortable selling if we get a resistant candle, so this week will be very important.
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EUR/USD: Euro Bears Roar in Pain Amid Impressive Rally
The shared currency appreciated against the dollar over the week, in line with a general trend for the pace of the dollar’s long and strong march higher to ease amid a shift in Federal Reserve (Fed) rate hike expectations.
The euro added 2.98% against its US peer and ended Friday at $1.1199. Last Friday, the pair closed at $1.0875.
It reached its weekly low of $1.0835 on Monday, but managed to rise ever since on a daily basis. On Friday, it rose to $1.1271, its highest since late February.
As for the daily performance, the European currency added 0.09% on Monday, 0.83% on Tuesday and 1.33% on Wednesday. It gained 0.90% on Thursday, while booked loss of 0.44% on Friday.
Euro bears in pain
The week brought a series of market-moving data from the both sides of the Atlantic. Undisputedly, the Federal Open Market Committee (FOMC) rate decision - accompanied by the monetary policy statement - was the biggest 'gig' in the currency pair. It turned out the document had a surprisingly bearish tone as it acknowledged the weaknesses since March with alarming clarity.
The FOMC clearly noted the economic disappointments in the form of slowing jobs growth, weaker household spending, softer fixed business spending, a slow recovery in housing, and declining exports. It is the first time in recent years that the Fed had listed that many weaknesses in the economy.
Just a few hours prior to that on Wednesday, the first estimate of the US Q1 GDP data shocked the markets, as the world number one economy nearly stalled, markedly missing estimates. (Read the full story here)
On the euro front, CPI prints for Germany and for the euro area as a whole indicated that the bloc stepped out from deflation. This - together with the market conditions affected by the ample QE program from the European Central Bank - sparked a rise in Bund yields, pushing the EU/US 10-year yield differential higher in favor of the euro.
Will it last?
Still, market watchers remain skeptical whether the rise in the euro, especially against the dollar, can last.
"Our analysis of the drivers behind euro/dollar suggests that it is front-end rates rather than long-end yields that are more important, implying that scope for the euro recovery is limited, in our view," Morgan Stanley analysts said in a note.
Even Rabobank thinks the rally in the euro will eventually stop, as the key driving factor behind the moves in the EUR/USD pair - monetary policy divergence - remain unchanged. The bank targeted the EUR/USD pair at $1.04 in the next twelve months.
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Euro Ends Nine-Month Tumble as Region’s Economy Seems to Awaken
The euro’s nine-month tumble is history.
The 19-nation currency posted its biggest weekly gain versus the dollar in six weeks on signs the European Central Bank’s stimulus plan has the region’s economy ready to generate stronger growth and inflation. U.S. first-quarter economic growth was slower than forecast, meanwhile, fanning speculation the Federal Reserve won’t rush to raise interest rates.
“The euro has looked heavily oversold for a while,” Shaun Osborne, head of global foreign-exchange strategy at Toronto-Dominion Bank, said by e-mail. “It has brought a much needed correction to the market.”
The euro gained 3 percent to $1.1199 this week in New York, staging a six-day climb that was the longest rally in more than a year. The 4.6 percent April rise was the first since June and largest since September 2010.
The shared currency strengthened 4 percent to 134.58 yen this week, the biggest gain in two years. Japan’s currency fell 1 percent to 120.15 per dollar.
Hedge funds and money managers reduced net bearish bets for the euro to weaken against the dollar again after reaching a record on March 31, according to Commodity Futures Trading Commission data. Futures positions betting on a weaker euro were at 197,766 contracts as of April 28, compared with 214,645 a week earlier.
Inflation Watch
Euro-area consumer prices ended a four-month streak of declines in April after falling 0.1 percent in March. The ECB seeks to foster inflation close to 2 percent.
The signs of rising prices reflected results for the central bank’s bond-buying program, sending the euro higher and helping fuel a rout in euro-area bond markets. Government bond yields moved higher in Germany and other nations, adding to the allure of euro-denominated assets.
“With German yields shooting higher and European equities getting squeezed, you saw those short euro-dollar positions that went with them get unwound too,” said Matt Derr, a foreign-exchange strategist at Credit Suisse Group AG in New York.
The common currency’s bounce above $1.10 has it sizing up a key hurdle: the 100-day moving average at about $1.13.
Run Room
“It might run a little higher still in the near-term,” TD Bank’s Osborne said. If it climbs above $1.13, the next target is the $1.15 to $1.16 range, he added.
Lackluster U.S. data magnified the euro’s rally by casting doubt on the timing of the Fed’s first interest-rate increase in almost a decade.
The biggest hit to the dollar came on April 29, when a report showed the U.S. economy sputtered to a near-halt in the first quarter, and the Federal Open Market Committee didn’t give a strong signal for higher rates. The greenback slid 1.3 percent against the euro that day.
“We’ve had a really significant move in terms of a retracement of the strong U.S. dollar position,” said Camilla Sutton, Toronto-based head of currency strategy at Bank of Nova Scotia. “As we all moved from one side of the boat to the other, it really created some pretty violent market moves across asset classes.”
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Let's see if the EUR/USD will continue the uptrend in Monday.
EUR/USD weekly outlook: May 4 - 8
The euro backed off two-month highs against the dollar on Friday after reports indicated that the U.S. economy may be stabilizing after a recent soft patch.
EUR/USD was down 0.22% to 1.1198 late Friday, still not far from two-month peaks of 1.1289.
The Institute for Supply Management reported that activity in the manufacturing sector was stable in April, after slowing in the five previous months.
The ISM manufacturing index came in at 51.5 in April, matching the March reading, which had been the lowest since May 2013.
Another report showed that U.S. consumer sentiment rose in April to its highest level since January.
Separately, the Commerce Department said construction spending fell 0.6% to an annual rate of $966.6 billion in March, the lowest level since September.
The reports, while mixed, fuelled optimism that the U.S. economy has turned a corner after a recent bout of weakness.
The dollar had received a boost after a report on Thursday showed that the number of Americans filing new claims for jobless benefits fell to a 15-year low of 262,000, pointing to healthy growth in the labor market.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last up 0.53% to 95.38 late Friday, after falling to two-month lows of 94.47 on Thursday.
Data earlier in the week showed that the U.S. economy grew just 0.2% in the three months to March, slowing from 2.2% in the final quarter of 2014. It was the slowest rate of growth in a year.
The weaker-than-expected data prompted investors to push back expectations on the timing of an initial rate hike by the Federal Reserve to later this year from midyear.
In its rate statement on Wednesday the Federal Reserve said recent indications of a slowdown in growth were probably due to “transitory factors.”
Demand for the euro continued to be underpinned after data on inflation and bank lending earlier in the week added to signs that the recovery in the region is gaining traction.
Sentiment on the single currency was also boosted by hopes that Greece is moving closer to an agreement with its international lenders on a package of economic reforms needed to unlock bailout funds.
In the week ahead, investors will be focusing on Friday’s U.S. nonfarm payrolls report, for a fresh indication on the strength of the economic recovery. Service sector reports from the euro zone will also be closely watched.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
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Spain Markit mftg PMI April 54.2 vs 54.7 exp
Weaker than expected helps give euro a jolt lower again
EURUSD news session lows of 1.1159
Italy Markit mftg PMI April final 53.8 vs 53.4 exp
Highest reading since April 2014
Euro not impressed. EURUSD 1.1158
Germany Markit mftg PMI April final 52.1 vs 51.9 exp
EURUSD still 1.1163 on the slightly improved final read but still down on March
EURUSD initially rose but found enough resistance at 1.1237 to give all its early gains and closed in the red near the low of the day, suggesting a shooting star pattern. We may see a pullback off this recent bullish move to 1.1034 before another move upward.