Eur/usd - page 498

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The euro was down against the US Dollar on Wednesday. By the closing of US trading EUR/USD was trading at 1.0974, shedding 0.05%. I believe that the support is now located at the level of 1.0955, the low of today's trading, and resistance is likely at the level of 1.1062 - Friday's high.
 
EUR/USD is trading somewhat higher today after three days of consolidating around 1.0960. Price is now 1.0988. Bearish momentum continues to be present.
 

German fin min monthly report says economy remains on a solid footing

The monthly report from Germany's finance ministry

(Main points, via Reuters):
  • The German economy should remain on a solid footing in 2016
  • Despite weakness in the global economy
  • Finance ministry expects a slight growth in exports over the rest of the year
  • Cites low interest rates, a robust job market and rising wages contributing to a moderate upswing
  • Says earlier this month the government raised its 2016 growth forecast to 1.8 percent from 1.7 percent previously (would be the strongest expansion rate 5 years)
  • Private consumption the main growth driver, this should remain the case in H2
  • Industrial production was weak in Q3, would be only a small boost for the economy in H2
 

Yesterday the EURUSD tried to rally but found enough resistance at the 10-day moving average to reverse and closed in the red, near the low of the day, furthermore closed below the previous day low, which suggests a strong bearish momentum.

 

The pair continues to trade well below the 10, 50 and 200-day moving averages that should act as dynamic resistances.

 

The key levels to watch are: the 10-day moving average at 1.1007 (resistance), a daily resistance at 1.1097, July swing low at 1.0952 (resistance), a daily support at 1.0900 and another daily support at 1.0819.

 
EUR/USD broke the psychological level of 1.09 and is now trading at 1.0892. The pair has been feeling the effect of the bearish momentum as it's already beyond the support level for the short-term. Next bear target is 1.0820.
 

EUR/USD Falls to Eight-Month Low


Sellers remain active in the euro, with EUR/USD dropping to a new eight-month low in today’s trading, solidly taking out the June 24th spike low established following the Brexit referendum. The pair is currently trading at 1.089, down 0.34% from Thursday’s N.Y. close.

The pair was under pressure on strength in the dollar pre-ECB in Thursday’s trading, experienced a muted reaction when the interest rate decision was announced, then spiked higher at the start of European Central Bank President Draghi’s press conference, breaching minor near term resistance levels and trading within striking distance of more significant resistance at 1.10584, representing the October 13/14 highs and a test of the former support defined by the August 5th reaction low.

However, the spike higher proved unsustainable as sellers quickly stepped in and drove the euro sharply lower to test the spike low established following the June Brexit referendum at 1.09119. At the N.Y. close, EUR/USD was down 0.46% from Wednesday’s closing level. As the euro moved to a 4-month low, the dollar rallied, advancing to a seven-month high.

Thursday’s flush was in response to the investors interpreting Draghi’s comments to suggest more stimulus is possible in December. According to a report from Reuters, Draghi “left a wide range of options on the table and emphasized that a long-awaited rise in inflation is predicated on ‘very substantial’ monetary accommodation.” Draghi also stated inflation is expected to rise gradually, baseline scenario is subject to downside risks and the December assessment will benefit from new projections through 2019 and committee work. He also noted that the latest data points to continued growth in Q3. Draghi did not discuss changing policy or tapering.

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EUR/USD forecast for the week of October 24, 2016


The EUR/USD pair initially tried to rally during the course of the week, but turn right back around to fall rather significantly. If we can reach down below the bottom of the range for the week, this market should continue to drop. We could then go to the 1.05 level as it is a massive amount of support as seen in the month of November. Any rally at this point in time will probably continue to show signs of exhaustion. With this, I remain bearish but it might be easier to sell this market rather than buy it.


 

EUR/USD Weekly Forecast October 24-28


EUR/USD pushed lower this past week to post a third consecutive weekly decline. The pair remained in a range in the first half of the week above notable support at 1.0970, continuing to decline in line with the daily downtrend after comments from Draghi at the ECB meeting held on Thursday.

Inflation data out of the United States this week failed to have much of an impact on the Dollar. CPI figures were in line with expectations with a rise of 0.3% in the month to September and 1.5% on an annual basis. The core figures came slightly softer than expected. A small decline in the currency pair was short-lived with support at 1.0970 triggering a bounce.

The ECB meeting delivered the most volatility during the past week. In the early part of the press conference, comments from Draghi that the ECB had not discussed extending the bond purchasing program triggered a spike higher in the Euro and as a result, a sharp decline in the Greenback. Draghi also stated that there was no discussing of tapering, dismissing earlier reports that the ECB had come to a consensus to taper their bond purchasing program. The main takeaway from the meeting was that the central bank was looking to delay decisions once again, but the clarification in regards to potential tapering resulted in a sharp move lower in the Euro, triggering a reversal across the majors.

The latest COT data reported a large build in short positioning for the Euro. On a week over week basis, non-commercials added a net $2.1 billion to bring the net short position to $15 billion. The Euro was reported to have the largest build on the short side among the majors in the week to October 18 with short contracts outpacing a build long contracts by two to one. The US Dollar net long was also increased to $19.3 billion from $17.6 billion reported in the prior week.

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The euro was down against the US Dollar on Friday. By the close of US trading EUR/USD was trading at 1.0882, shedding 0.42%. I believe that the support is now located at the level of 1.0859, the low of Friday's trading, and resistance is likely at the level of 1.1041 - the maximum of Thursday.
 
  1. Flash PMIs: Monday morning: 7:00 for France, 7:30 for Germany and 8:00 for the euro-zone. Markit’s preliminary purchasing managers’ indices for October are generally expected to show a small improvement in comparison to September. France’s manufacturing PMI stood on 49.7 in the final read for September, just under the 50 point threshold separating expansion and contraction. It is now expected to rise to 50.2 points. The services sector is expected to advance from 53.3 to 54.1 points. Germany’s manufacturing PMI, the most closely-watched number, carries expectations for remaining unchanged at 54.3 points. The services PMI is expected to rise from 50.9 to 51.9 points. The all-European manufacturing PMI is expected to rise from 52.6 to 52.7. The services one is projected to move from 52.2 to 52.4.
  2. German Ifo Business Climate: Tuesday, 8:00. IFO is Germany’s No. 1 Think-tank. Despite releasing its data after competitors ZEW, it has a big impact. In September, the indicator surprised with a jump to 109.5 points. A minimal move higher to 109.6 is on the cards now.
  3. Draghi talks: Tuesday, 15:30 The president of the ECB has another chance to rock markets after he caused commotion in the euro at the rate decision. Speaking in Berlin, monetary policy is one of the topics. He will likely call governments to do more but markets will focus on any hints about the future of the Bank’s QE program.
  4. German GfK Consumer Climate: Wednesday, 6:00. This 2000 strong consumer survey was rising for quite a few months before sliding back to 10 points in September. A rise to 10.1 is estimated now.
  5. German Import Prices: Wednesday, 7:00. Prices of imported goods feed into consumer prices. For European countries, oil prices make a large portion of imported good. After a drop of 0.2% in August, a small rise of 0.1% is on the cards.
  6. Spanish Unemployment Rate: Thursday, 7:00. Spain is the euro-zone’s fourth-largest economy and it suffers from a very high unemployment rate of 20%, and that’s after seeing much higher levels in previous years. A drop to 19.3% is predicted now.
  7. Monetary data: Thursday, 8:00. The ECB’s stimulus has led to accelerated money creation as well as more loans. M3 Money Supply is expected to remain at the same pace of 5.1% in September. Private loans are predicted to accelerate from 1.8% to 1.9% y/y.
  8. German CPI: Friday, during the morning from the various German states with the all-German number at 12:00. Prices advanced by 0.1% in September, not going anywhere fast. The same pace is expected for October, in the preliminary release.
  9. French GDP: Friday, 5:30. According to the final figure for Q2 2016, the French economy suffered from contraction of 0.1%. A return to growth is expected with +0.3% this time. France is the euro area’s second-largest economy.
  10. French CPI: Friday, 6:45. Consumer prices slid by 0.2% in September and are expected to bounce back by the same scale in October. Note that at the same time France releases its consumer spending, which carries expectations for a rise of 0.3%. However, CPI has a priority as it impacts the ECB more directly.
  11. Spanish CPI: Friday, 7:00. Spain suffered from deflation for a long time, but saw a rise in prices back in September: 0.2% y/y according to the final figure. An acceleration to 0.3% is on the cards now.
  12. Spanish GDP: Friday, 7:00. Equally important as the CPI number, GDP growth is predicted to remain strong in Spain: a pace of 0.7% q/q in Q3 2016, that is expected is slower than 0.8% seen in Q2, but nonetheless solid.
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