Expected Sideways on Euro

EURUSD 1H

Yesterday’s Trading:

Tuesday’s American session saw the euro bulls managing to shift the maximum to 1.1057 using support from the euro/pound cross. The euro/pound rose to 0.7792. The euro received support in the cross from the release of positive statistics in the Eurozone. Eurozone GDP for Q4 of 2015 and industrial production in Germany came out better than expected.

According to preliminary data, the Eurozone economy in Q4 grew by 0.3% QoQ and 1.6% YoY against an expected 0.3% QoQ and 1.5% YoY. The previous value was reassessed from -1.2% to -0.3%. .

By the close of the day, the euro had lost its gains and was at 1.10. Pressure on the currency came from risk fleeing and the approaching ECB meeting on Thursday.

Main news of the day (EET):

• 11:30, UK industrial manufacturing, production in the manufacturing industry for January;
• 17:00, Bank of Canada interest rate decision and announcement;
• 17:30, US oil reserve report from Ministry for Energy;
• 22:00, Reserve Bank of New Zealand interest rate decision and announcement;
• 22:05, RBNZ press conference.

Market Expectations:

The euro/dollar in Asia was down to 1.0968. The euro is still under pressure since market participants are expecting the ECB to undertake further stimulative measures. Taking the technical factors on the hourly into account, with trade opening in Europe we can expect a rise to 1.1020 and a close of the day around 1.0987.

Technical Analysis:

• Intraday target maximum: 1.1023, minimum: 1.0960, close: 1.0987;
• Intraday Volatility for last 10 weeks: 103 points (4 figures).

The trend line was broken during the Asian session. The euro/dollar fell to 1.0968. The support runs through 1.0952. If the euro/pound cross continues to fall, it’s likely a rebound will take place at 1.0952. Taking into account that bull divergence has formed, I expect to see a strengthening of the euro to 1.1020 in the first half of the day. Then we can ready ourselves for the ECB decision and Draghi’s press conference.

EURGBP 1H

Five days with the euro/pound trading sideways in a 70 point range have gone by. Yesterday’s positive Eurozone and German data lifted the rate to 0.7792. From here the price returned to the LB. I reckon that the pair will stay trading 0.7720-0.7793 until Thursday. It’s worth banking on a depart from the price range after the ECB makes clear its decision.

Daily

On Tuesday the day closed neutral. Yesterday’s minimum was broken this morning. Euro buyers should be on the alert for bear signals on the stochastic. An inversion is in its development stage on the lesser timeframes. The euro will remain under pressure until the ECB convenes. I’ll make my conclusions on Friday after I’ve heard what Draghi has to say.

Weekly

I’m not going to bother making comment on the weekly graph until tomorrow. The resistance sits at 1.1075/80.

By: Vladislav Antonov