Euro: USD/EUR (EUR=X) rotates higher after false break lower
The Euro-to-Dollar exchange rate is trading at 1.1345 at the start of the new week after rising over half a percent from the previous week. Although continued concerns over Eurozone growth weighed on the Euro it still outperformed the Dollar which fell even more sharply after the minutes from the last Federal Reserve meeting underlined their more cautious approach.
What to Watch this Week
The main release for the Euro in the coming week is flash inflation data for February, out on Friday at 11.00 GMT. Inflation is expected to show a 1.5% rise from 1.4% please. Core inflation is forecast to show a 1.1% rise, the same as the previous month of January.
Inflation is important because it informs central bank policy which is a major driver of currency appreciation. When central banks raise interest rates it drives up the local currency by attracting and keeping greater inflows of foreign capital.
Whilst the European Central Bank (ECB) is not forecast to raise interest rates anytime soon, it has said it is considering raising them after the summer, yet if inflation and growth remain subdued, they may change their mind and delay raising interest rates. Such a delay would lead to a decline in the Euro as expectations are recalibrated.
“We have seen commentary from key ECB policymakers over recent days that suggest that the central bank is increasingly recognising the slowdown in economic growth and is prepared to adjust policy in response,” says Nick Kounis, an economist with ABN AMRO. “The implications of weaker growth for the inflation outlook would be a key part of the discussion at the next Governing Council meeting.”
A disappointing, below-expectation reading would likely be negative for the Euro exchange rate complex as markets would expect the ECB to engage a cautious stance; a beat could help the currency as it could suggest to markets that perhaps the economy is turning around following a particularly fallow period of performance.
“We think interest rates will ultimately be on hold until December 2020. The dovish shift by the ECB will lead to a further leg down in Bund yields, a flattening of curves and weigh on the Euro,” says Kounis.
The latest unemployment rate data is out at the same time as inflation and is forecast to remain unchanged at 7.9%. Unemployment has been a bright spot for the Euro due to a consistent steady decline – a lower reading in January would further support the single currency.
Another key release for the Euro is business confidence data at 11.00 on Wednesday. It is forecast to show a drop from 0.69 to 0.63 in February. Flash PMIs in February provided a “glimmer of hope” for the Eurozone so analysts may watch PMI data more keenly than usual to see if it backs up a brighter outlook.
“The flash reading for Eurozone PMIs provided some glimmer of hope that the severe slowdown might be coming to a halt,” says Raffi Boyadjian, currency analyst at broker XM.com, “There could be more evidence of the downtrend bottoming out in Wednesday’s economic sentiment indicator for the Eurozone.”
Overall, the bias in prices is: Sideways.
The projected upper bound is: 1.15.
The projected lower bound is: 1.12.
The projected closing price is: 1.13.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 3 black candles for a net of 3 white candles. During the past 50 bars, there have been 25 white candles and 24 black candles for a net of 1 white 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 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 70.2060. This is not an overbought or oversold reading. The last signal was a buy 7 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 47.71. 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 137 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 50. This is not a topping or bottoming area. The last signal was a buy 6 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 down -0.000 at 1.134. Volume was 99% below average (consolidating) and Bollinger Bands were 12% wider than normal.
Open High Low Close Volume___
1.134 1.135 1.133 1.134 803
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 1.13 1.14 1.15
Volatility: 5 8 8
Volume: 130,766 139,873 144,339
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 1.5% 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 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 13 periods.