Euro: USD/EUR (EUR=X) remained under pressure against a strengthening USD

Euro: USD/EUR (EUR=X) remained under pressure against a strengthening USD

Euro: USD/EUR (EUR=X) remained under pressure against a strengthening USD

There was plenty of volatility to start the week as FX markets showed an unusual amount of movement. Japanese retail sales beat expectations, but the Nikkei 225 was not impressed, falling 0.6%, while the JPY gained in a noticeably risk-off period of trade. Cryptocurrency markets were moving tentatively higher, as Bitcoin rapidly retraced a sharp dip to move 1% higher. Oil markets were also lower, as the negative tone drifted into US stock futures dragging down the mood further. The British Pound could be in for a torrid start to the week as UK tabloids were filled with the headline that Boris Johnson was making moves to significantly increase the risk of a no-deal Brexit.

The Day Ahead

In probably the quietest day of economic data that we have seen for a while, there is almost no economic data whatsoever. The UK’s Nationwide Housing Price Index is scheduled for sometime in the morning. No US data is available, with only Building Consents in New Zealand late in the evening of any relevance to G10 FX.

Tentative GBP Nationwide HPI (MoM)

Tentative GBP Nationwide HPI (YoY)

23:45 NZD Building Consents (MoM) (Jun)

Foreign Exchange Markets

The European Central Bank often takes a back seat to the Federal Reserve, but that does not mean their reaction to the Fed’s decisions is any less important to the Euro to Dollar exchange rate (EUR/USD). After last week’s subtle comments, analysts at ING noted the interesting dynamic that Draghi had been unable to force the Euro lower,

“The ECB delivered quite a dovish message by hinting that three measures are on their way: a rate cut, a new round of quantitative easing and tiered system for reserve remuneration. The impact on EUR/USD was negative initially, but the EUR rebounded to end above the pre-meeting level.”

There are plenty of extremely bearish fundamentals for the Euro, and an understandably this appears to make ING’s analysts extremely cautious about predicting anything positive for the Euro

“We believe the outlook for the common currency remains very clouded given that the ECB may deliver a 20bp rate cut (12bp cuts are priced in) and formally announce quantitative easing. Added to this, there are lacklustre forward-looking indicators (PMIs and Ifo dropped in July) that are unlikely to recover if (as we expect) the two main external risks – trade tensions and Brexit uncertainty – don’t abate.”

A struggling Euro almost certainly means trouble for the British Pound, and Brexit is almost certain to continue to prove a significant headwind for both Sterling and the common currency. Boris Johnson will almost certainly try and spook the EU into making a concession, and he certainly has the wildcard factor to do just that. The US Dollar will continue humming along in the background, and without any meaningful European growth story to talk about, is looking as attractive as it did before the Federal Reserve started ruminating about possibly cutting interest rates.

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 1.12.

The projected upper bound is: 1.13.

The projected lower bound is: 1.10.

The projected closing price is: 1.11.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 25 white candles and 25 black 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 27.9516. This is not an overbought or oversold reading. The last signal was a buy 0 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 39.19. 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 247 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 -106.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 13 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 19 period(s) ago.

Rex Takasugi – TD Profile

FOREX EUR= closed up 0.002 at 1.115. Volume was 37% below average (neutral) and Bollinger Bands were 1% wider than normal.

Open     High      Low     Close     Volume___
1.113 1.115 1.111 1.115 60,000
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: 74,352 78,939 122,966

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 1.4% 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 14 periods.

The following two tabs change content below.
HEFFX has become one of Asia’s leading financial services companies with interests in Publishing, Private Equity, Capital Markets, Mining, Retail, Transport and Agriculture that span every continent of the world. Our clearing partners have unprecedented experience in Equities, Options, Forex and Commodities brokering, banking, physical metals dealing, floor brokering and trading.

You must be logged in to post comments :  
CONNECT WITH