Euro: USD/EUR (EUR=X) forecast to stabilise following sharp fall

Euro: USD/EUR (EUR=X) forecast to stabilise following sharp fall

Euro: USD/EUR (EUR=X) forecast to stabilise following sharp fall

Volatility in the Euro-to-Dollar exchange rate has spiked over the past 24 hours after the Dollar rose sharply in response to some better-than-forecast U.S. data, and in the process drove the EUR/USD down half a percent.

Meanwhile, news of an Iranian retaliation against the U.S. in the Middle East – a U.S. base in Iraq has been attacked – has been met with little by way of reaction in the foreign exchange markets and confirms, that for currencies at least, data still remains king.

The EUR/USD exchange rate fell half a percent to 1.1135, from a daily high of 1.1197, after it was reported the U.S. ISM non-manufacturing index rose 1.1 point to 55.0 in December, this being better than the 54.5 expected by the market.

“This is better than we expected; it appears that firms have responded immediately, and positively, to the news that the Phase One trade deal would prevent the imposition of further tariffs on consumer goods,” says Ian Shepherdson, Chief Economist at Pantheon Macroeconomics.

“This report should calm fears of weakness in the ISM manufacturing index spilling into the service sector,” says Sarah House, Senior Economist at Wells Fargo Securities, “current conditions rebounded in December as the largest gain came from the business activity sub-index, up 5.6 points. That serves as the latest indication that activity in the service sector continues to hold up as manufacturing activity has floundered.”

While the Dollar found some support from data, it must be noted that data out of the Eurozone continues to point to stabilisation after a soft 2019. Expectations of a recovery in economic growth could well see the Euro better supported in 2020, and this expectation might explain the EUR/USD exchange rate’s ongoing recovery from October 2019 lows.

The Euro outlook improved Tuesday after Eurostat data showed inflation hitting a nine-month high in December and consumers opening their wallets in the shops in November, adding to other recent signs that the continental economy is stabilising in the wake of an 18-month retrenchment.

Eurozone inflation rose from 1% to 1.3% in December, its highest level since April 2019, due to gains in commodity prices while core inflation remained unchanged at a post-crisis high of 1.3% last month. Core inflation removes commodity-linked food and energy items from the goods basket so is seen by central bankers and markets alike as the more reliable gauge of domestically generated inflation trends.

Separately retail sales were reported to have risen by 1% in November while the 0.6% contraction initially declared for October was revised to -0.3% in what was another win for the Euro and apparently stabilising continental economy. There had been concerns last year that the the downturn in the manufacturing sector would spread into services and the domestic side of the economy.

Technical Indicators

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 1.11.

The projected upper bound is: 1.12.

The projected lower bound is: 1.10.

The projected closing price is: 1.11.

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 26 white candles and 23 black candles for a net of 3 white candles.

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 29.9705. This is not an overbought or oversold reading. The last signal was a sell 4 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 47.04. 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 91 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 -26. This is not a topping or bottoming area. The last signal was a sell 4 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 0 period(s) ago.

Rex Takasugi – TD Profile

FOREX EUR= closed down -0.004 at 1.111. Volume was 32% above average (neutral) and Bollinger Bands were 12% narrower than normal.

Open     High      Low     Close     Volume___
1.115 1.117 1.111 1.111 86,676
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 1.12 1.11 1.11
Volatility: 6 5 6
Volume: 49,376 59,050 79,661

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 0.3% below its 200-period moving average and is in an upward trend. Volatility is 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 20 periods. our momentum oscillator has set a new 14-period low while the security price has not. This is a bearish divergence.

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