Euro: USD/EUR (EUR=X) Positive Mood on Markets
After last week’s generally risk averse mood, risk appetite started this week on a stronger footing. Sentiment was aided by encouraging early results from a Covid-19 vaccine trial, as well as by a further easing of restrictions in some countries. Expectations of additional stimulus from central banks also acted as a tailwind.
The improvement in investor sentiment was evident on equity markets. In Europe, most of the main indices finished the day up between 3-5%. At the closing bell on Wall Street last night, the S&P 500 was up over 3% on the day. Against this ‘risk on’ backdrop, the dollar has traded lower over the past 24 hours. At the same time, sterling has recovered some ground. Meanwhile, news of progress on a recovery fund for Europe has been helpful to the euro.
In level terms, the softer tone to the dollar is reflected in EUR/USD opening this morning above the $1.09 mark. Similarly, GBP/USD has also moved higher, with the pair regaining the $1.22 threshold. Meantime, EUR/GBP has edged slightly lower compared to yesterday’s open, changing hands this morning at 89.3p.
In early morning macro newsflow, we have already had the release of UK labour market figures. The unemployment rate fell unexpectedly to 3.9% from 4% in Q1. However, the more timely jobless claims number for April, recorded its biggest ever monthly increase and rose to its highest level since 1996, reflecting the impact from the restrictions last month.
The few other data highlights today are the German ZEW (May) and US housing starts (April). Fed Chair Powell will testify before the US Senate, but it is unclear if the appearance will provide any fresh insights.
Shayne Heffernan Trade Idea
“The Franco-German agreement is big news. This has made it difficult for speculators to close their short positions on the currency.” Shayne Heffernan PhD in Economics
Why This Matters
The euro held firm on Wednesday, basking in the afterglow of a Franco-German proposal for a common fund that could move Europe closer to fiscal union.
The euro stood flat at $1.0924, having hit a two-week peak of $1.09755 in European trade.
The common currency also fetched 1.0615 franc, after rising almost 1.0% so far in the week against the safe haven currency while against the yen, it stood near five-week highs of 118.20 yen.
France and Germany proposed on Monday a 500 billion euro ($543 billion) Recovery Fund to offer grants to regions and sectors hit hardest by the coronavirus pandemic and to allow borrowing by the European Commission on behalf of the whole EU.
The proposals, while facing opposition from wealthier EU members, could move the European Union a step closer to a transfer union that would help mitigate various economic imbalances in the currency bloc.
Also helping the common currency was a survey showing German investor sentiment improved much more than expected in May as concerns eased over the impact of the coronavirus pandemic on Europe’s largest economy.
The U.S. dollar tacked on 0.2% against the yen to 107.94 yen, near a five-week high of 108.085 hit in U.S. trade on Tuesday.
The U.S. currency lost traction on Tuesday after a report from medical news website STAT said early data from Moderna Inc’s COVID-19 vaccine was insufficient, pouring cold water on optimism sparked a day earlier by the company’s announcement.
Data showed U.S. homebuilding dropped by the most on record last month and permits for future construction tumbled, a stark reminder of the heavy economic toll exacted by the outbreak.
The dollar index stood at 99.571, essentially stuck in its well-worn range since early April.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 1.12.
The projected lower bound is: 1.07.
The projected closing price is: 1.09.
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 24 white candles and 26 black candles for a net of 2 black 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 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.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 81.3955. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 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 56.47. 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 sell 51 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 99. This is not a topping or bottoming area. The last signal was a sell 0 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 2 period(s) ago.
Rex Takasugi – TD Profile
FOREX EUR= closed up 0.002 at 1.094. Volume was 82% below average (consolidating) and Bollinger Bands were 45% narrower than normal.
Open High Low Close Volume 1.093 1.094 1.092 1.094 18,574
Technical Outlook Short Term: Neutral Intermediate Term: Bearish Long Term: Bearish
Moving Averages: 10-period 50-period 200-period Close: 1.09 1.09 1.10 Volatility: 6 13 9 Volume: 99,129 118,353 83,382
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.
FOREX EUR= is currently 0.7% below its 200-period moving average and is in an downward 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 bearish on EUR= and have had this outlook for the last 4 periods.
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