EUR – Unemployment Down, Exchange Rate Up

EUR – Unemployment Down, Exchange Rate Up

The euro broke through the psychologically important $1.20 barrier against the U.S. dollar for the first time since January 2015 on Tuesday, a move that could help cement the shared currency’s newfound role as a global haven unless the European Central Bank intervenes.

The shared currency has strengthened more than 14% against a broadly weaker dollar EURUSD, +0.2504%  this year, as its U.S. rival continues to suffer, in part, from eruptions in the Trump administration, which has also appeared to favor a weaker currency. The euro rally has been so seemingly unstoppable that analysts are beginning to wonder whether the ECB will comment on the currency’s strength in the near term.

Supportive economic data, as well as political wins for the pro-globalization and free trade camps in the Netherlands and France have put Europe ahead this year. The currency bloc’s economy is widely expected to grow faster than that of the U.S. in the medium term, Shannon Saccocia, head of asset allocation and portfolio strategy at Boston Private.

“The euro trade might be overdone, but the growth and data momentum is still there,” said Mark McCormick, North America head of FX at TD Securities, adding that weaknesses in the Italian banking system as well as question marks around the Italian general election next May could introduce some volatility.

Most recently, eurozone unemployment rate hit an eight-year low of 9.1% in June, while GDP grew 2.1% in the second quarter this year. This week, consumer, economic, industrial and services indicators are due on Wednesday, followed by inflation and July unemployment data on Thursday, and manufacturing data on Friday.

As long as euro-dollar continues to trade above the August 2 high at $1.1910, the upside bias will remain intact.

The euro also hit an eight-year high of £0.9308 against the British pound on Tuesday. Its main regional trading partner entered the third round of Brexit negotiations on Monday. Brussels has been tough on Britain, which has been struggling for direction on its Brexit stance. Prime Minister Theresa May, who was in favor of a hard Brexit, recently conceded that EU laws will still impact Britain after it leaves the union, while the Labor party prefers a softer solution.

Technical Analysis

Overall, the bias in prices is: Upwards.

Short term: Prices are moving.

Intermediate term: Prices are trending.

The projected upper bound is: 1.22.

The projected lower bound is: 1.19.

The projected closing price is: 1.20.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 31 white candles and 19 black candles for a net of 12 white candles.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 89.3266. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 17 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 70.01. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 17 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 223.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 7 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 1 period(s) ago.

Rex Takasugi – TD Profile

FOREX EUR= closed up 0.003 at 1.201. Volume was 7% above average (neutral) and Bollinger Bands were 23% narrower than normal.

Open  High    Low    Close   Volume
1.198   1.207   1.195   1.201   122,445

Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period   50-period   200-period
Close:                       1.18             1.16               1.10
Volatility:                8                  9                    9
Volume:                  127,015       116,668        117,719

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX EUR= is currently 9.5% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of EUR= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on EUR= and have had this outlook for the last 44 periods. Our momentum oscillator is currently indicating that EUR= is currently in an overbought condition.

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Ivy Heffernan

Ivy Heffernan, student of Economics at Buckingham University. Junior Analyst at HeffX and experienced marketing director.

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