Euro: USD/EUR (EUR=X) eyes ECB decision as the USD faces GDP data

Euro: USD/EUR (EUR=X) eyes ECB decision as the USD faces GDP data

Euro: USD/EUR (EUR=X) eyes ECB decision as the USD faces GDP data

The Euro-to-Dollar rate is set to begin trading around 1.1220 at the start of the new week after gaining half a percent by last Friday’s close, although the charts argue for more range-bound trading from the single currency in the days ahead.

The 4 hour chart, which we use to determine the short-term outlook including the next 5 days, shows how the pair has formed a range since the start of July with a very clear floor and ceiling at 1.1195 and 1.1290 respectively. There is a good chance the pair could continue in this range over the short-term. 

Of course, there is also a chance of a breakout. A break above the range highs would probably see the pair rise up to an upside target at 1.1340, while a clear break beneath the lows would augur a move down to the 1.1135 area. 

These targets are based on an extrapolation of 61.8% of the height of the range, which is our usual method for generating breakout targets. 

The Euro has quite a busy week ahead, with the European Central Bank(ECB) interest rate decision on Thursday the most important event. But preliminary readings for the July PMIs out on Wednesday and the ECB’s bank lending survey on Tuesday are also important.  

June inflation came out marginally better-than-expected at 1.3%, and 1.1% for core, but markets are now pricing in more-than a 50% chance the ECB will cut its interest rate on Thursday. This could still weigh on the Euro throughout the week because the cut is not yet fully priced-in. 

In other words, a rate cut from the ECB this week could lend more support to the Pound-to-Euro rate in the days ahead. Consensus is for the July manufacturing PMI to sit unchanged at 47.6 and for the services PMI to slip from53.6 to 53.3 when the data is released on Wednesday at 9.00 BST. 

“The Eurozone’s composite PMI – seen as a strong indicator of GDP growth – has been inching higher in recent months on the back of an improving services sector. However, the manufacturing PMI has been stuck in negative territory, weighed by increased trade and Brexit uncertainty. There are concerns that the manufacturing weakness could soon spill over into the broader economy,” says Raffi Boyadijian, an analyst at XM.com. 

Finally, the ECB bank lending survey out on Tuesday at 9.00 may be another focus of interest for investors since an uptick in lending will be key to any continental economic recovery. If the survey shows a fall it will be another sign that growth is under threat, and a red flag for the ECB. 

Overall, the bias in prices is: Sideways.

The projected upper bound is: 1.13.

The projected lower bound is: 1.11.

The projected closing price is: 1.12.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 24 white candles and 26 black candles for a net of 2 black candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

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 45.0984. This is not an overbought or oversold reading. The last signal was a buy 8 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 44.30. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 242 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 -87. This is not a topping or bottoming area. The last signal was a buy 8 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 sell 14 period(s) ago.

Rex Takasugi – TD Profile

FOREX EUR= closed down -0.001 at 1.121. Volume was 100% below average (consolidating) and Bollinger Bands were 9% wider than normal.

Open High Low Close Volume___
1.122 1.122 1.121 1.121 241

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period     50-period     200-period
Close: 1.12 1.12 1.13
Volatility: 6 6 7
Volume: 69,067 80,121 123,999

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 0.9% below its 200-period moving average and is in an downward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect moderate flows of volume out of EUR= (mildly bearish). Our trend forecasting oscillators are currently bearish on EUR= and have had this outlook for the last 9 periods.

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