Technical Analysis by Alpari

[Alpari]

Quiet Before Payrolls

Yesterday’s Trading:

The euro/dollar rose by 450 points on the American session to 1.0980. The active closure of short positions on the euro was sparked by the ECB decision and what Draghi had to say. Market participants expected more aggressive measures to be taken with regards to relaxing monetary policy.

Volatility on the market rose 9 minutes before the official ECB release. Before the results of the ECB meeting were out, the Financial Times wrote on twitter that the ECB would not change its monetary policy. Due to this misinformation, the market whipped up a storm. The euro/dollar jumped 120 points to 1.0657. Then it became clear (at 14:45 EET) that the ECB would drop its deposit rate and leave its base rate unchanged. The euro fell by 157 points to 1.0518.

The ECB dropped its deposit rate from -0.2% to -0.3%. The base rate stayed at 0.05%. Mario Draghi announced at the press conference that the ECB would keep their asset purchasing program at 60 billion euros per month and extend the program by 6 months to March 2017.

Since market participants were expecting the ECB to extend QE and this was already accounted for in the price, everyone was in a rush to close their short positions. Even Janet Yellen couldn’t muscle any limelight off the Europeans with her speech.

Eurozone GDP forecasts: for 2015 it was upped from 1.4% to 1.5%; for 2016 it was left unchanged at 1.7%; and the forecast was increased for 2017 from 1.8% to 1.9%. Inflation expectations were down: 2016 – from 1.1% to 1.0%; 2017 – from 1.7% to 1.6%.

The pound/dollar was up 200 points by the end of the day and stood at 1.5135. The dollar/frank was down 300 points to 0.9930. The Aussie/Yankee dollar pair was practically unchanged but the Aussie was feeling under pressure in its crosses (GBP/AUD, AUD/CHF, EUR/AUD).

Main news of the day (EET):

• 09:00, German October manufacturing orders;
• 15:30, Canadian October balance of trade, unemployment level and job creation for November. US average hourly wage for November, balance of trade for October, NFP and unemployment level for November;
• 18:45, Mario Draghi to speak;
• OPEC meeting.

Market Expectations:

I’m doing this review without graphs since the market is going to be under pressure from the American NFP labor market report. I didn’t make any forecasts yesterday and today is no different in this respect. The best trading decision of the day is to take a break. However, if you really want to test your strength on the market and get your fill of adrenaline for the whole month ahead – knock yourself out.

The market expects the US to have created 200,000 non-agricultural jobs in November, against October’s total of 271,000 If the November value is around 150k, the market is unlikely to give this deviation real contemplation. The dollar, of course, will fall, but only slightly. Otherwise, if we see strong data, the pair will look to correct by 100 points. Traders will only wake up and react to yesterday’s euro rally on Monday.

On Wednesday trader attention will be on the ADP, the Bank of Canada’s interest rate decision and a speech from Janet Yellen.

Technical Analysis:

EUR/USD: the euro/dollar is trading at the U5 on the hourly. The balance point is at the LB (1.0804). This level corresponds to the 38.2% fibo level from the 1.0518 to 1.0980 growth. What I expected to happen to euro growth after 20-24th November with a bull phase has already come to fruition even though the bulls have until the end of December.

I’m not ready at the moment to say where the correctional recoil levels are for the euro. More time is needed to make an accurate analysis. One thing is clear though, Draghi has disappointed the market. The sellers have left and the buyers are back.

GBP/USD: I’ve only made one review today since I haven’t forecasted any particular scenarios. The pound/dollar has restored by 240 points to the U3 (on the hourly). There is bull divergence on the daily time period and this, of course, is a bull signal. A hammer is forming on the weekly which is also a bull signal.

The key event of the day is the American labor market report – the NFP.

Vladislav Antonov, Alpari

 

[Alpari]

Euro/Dollar: Expected Correction to LB after Maximum Update

Hourly

Yesterday’s Trading:

By the end of Wednesday the euro/dollar had renewed to the U4 at 1.1042. Growth for the pair exceeded one figure. There was no news yesterday to put the dollar down. More long positions on the dollar were closed yesterday as they have been since the ECB declined to ratchet up their efforts and loosen their monetary policy.

Traders who have been buying dollars all year are patiently waiting for the Fed to up their base rate and the regulator has been making them wait since April of this year due to the weak macroeconomic data.

Main news of the day (EET):

• 10:30, SNB interest rate decision;
• 11:30, UK balance of trade for October;
• 14:00, BoE interest rate decision and asset purchases. At the same time we will get a look at the Bank’s minutes;
• 15:30, US initial unemployment benefit applications;
• 20:30, Mark Carney to speak;
• 21:00, US monthly budget report (November).

Market Expectations:

The focus for Thursday is on the Swiss National Bank and Bank of England.

The euro/dollar is at the top of the MA channel. Due to this, I expect the pair to renew its maximum and return to the LB at 1.0975.

Technical Analysis:

• Intraday target maximum: 1.1050, minimum: 1.0975, close: 1.1000;
• Intraday volatility for last 10 weeks: 103 points (4 figures).

At the moment we can see my previous forecast working its magic for the euro. Since the hourly stochastic is already down, I expect to see a renewal of the maximum and a bounce to the LB. Today we need to keep an eye on how the euro/pound does. Volatility will build after the BoE’s minutes come out. If there are more (than one) MPC members who want to up the rate, the pound/dollar will shoot up by another 100 points and this will send the euro/pound right down. Due to this, the euro could be down against the dollar.

Daily

The euro/dollar set a new maximum on Wednesday. My upward triangle is so far right as rain (read yesterday’s euro idea). The euro/dollar was down to 1.0518 as a saw. Now I’m looking at this pattern as if it’s mirrored. Only the number of waves and the structure could be different. Now to the Weekly.

Weekly

My eyes are on the formation of a double bottom. If the speed of the recovery on the euro doesn’t slow up, the closest resistance level will become 1.11. The weekly indicators are showing a strengthening for the euro.

Vladislav Antonov, Alpari

 

[Alpari]

Euro/Dollar: Expected Drop to 1.0861 by Europe’s Close

Hourly

Yesterday’s Trading:

The USD on Thursday managed to break its two-day falling habit. The euro/dollar bounced from the LB at 1.1042 to 1.0924. The forecasted data for initial unemployment benefit applications in the US was exceeded and this held back the pair.

The number of for initial unemployment benefit applications in the US for the week ending 05/12 was 282k (forecasted: 269k, previous: 269k).

Main news of the day (EET):

• 9:00, German November CPI;
• 11:30, UK consumer inflation expectations;
• 15:30, US retail sales and producer price index for November;
• 17:00, US Reuters Michigan December consumer confidence index for December;
• On Sunday at 7:30 in China some data will be published on changes in retail sales and industrial manufacturing for November, in addition to data on investment volume in the key funds for October. These are important indicators for currency trading.

Market Expectations:

The pair has been consolidating in a narrow range for 13 hours. I had a look at the different options for Friday: most of them are showing a sharp fall for the euro to the D3. This sort of fall contradicts the daily forecast from the previous idea.

If we make a channel along the three points, 1.0980-1.1042 and 1.0795 (black channel), then the lower limit sits on the D3. We wouldn’t want it to fall below 1.0858, otherwise we will once again see the euro shoot down as the FOMC meeting approaches (16th December). What we get is a wide range forming in which the euro/dollar could remain until the new year.

Technical Analysis:

• Intraday target maximum: 1.0971, minimum: 1.0861, close: 1.0890;
• Intraday volatility for last 10 weeks: 103 points (4 figures).

On Friday I expect to see the euro cheapen against the dollar to 1.0861. I am a little at odds with myself in saying this, but I will offer one scenario. How else could it go for the euro? A fall to 1.0910 and a ricochet back to 1.1005. As to whether to take a decision on which trade to make, follow your trading rules and signals. The market is changing fast and in an hour the technical picture could be flipped on its head.

Daily

My upward triangle formation is so far being confirmed (read my last euro idea). After a renewal of the maximum, the euro fell. So the pattern isn’t ruined, we need the day to close below 1.0860. Now to the Weekly.

Weekly

I’m continuing to track the forming of a double bottom. The weekly indicators are showing a strengthening of the euro and the daily ones are signalling the death of the bullish impulse. Today is important since any fall in the rate could bring about a bear signal on a pinbar.

Vladislav Antonov, Alpari

 

[Alpari]

Pound/Dollar: Balanced

Hourly

The pound/dollar on Thursday was down to 1.5110 after the Bank of England convened. After US stats came out, the rate restored to 1.5187. The situation is ambiguous for me. Due to this and according to the internal spike that is forming, I expect the GBP/USD to fall to the 90th degree. Since the indicators are down, it’s likely that there’ll be a false break upwards. This will allow the indicators to offload and sell the pound from 45 degrees. The important events have passed and now there’s only the Fed meeting to go. Before this meeting I expect to see fluctuations in all directions in a wide range.

Daily

The Bank of England met and kept everything as is was. 8 members of the MPC voted to keep the base rate the same with one wanting an increase. The pound reacted to the minutes with a fall. Today it’s likely that the correctional movement will continue.

Weekly

No comment.

Vladislav Antonov, Alpari

 

[Alpari]

Euro/Dollar: Expected Fall to 1.0780

Hourly

Yesterday’s Trading:

The euro/dollar experienced sharp fluctuations in a range of 150 points on Monday. In the first half of the day, the euro strengthened against the USD to 1.0945 following the publication of business activity data for Germany and the Eurozone. Business activity in December was up.

Inflation in Germany was down, increasing the likelihood of an extension of economic stimulus measures from the ECB. Preliminary German CPI data for December stood at -0.1% MoM, 0.3% YoY (forecasted: 0.2% MoM, 0.6% YoY, previous: 0.1% MoM, 0.4% YoY).

The EUR/USD dropped to 1.0780 at the US session. The euro bulls couldn’t manage to restore their losses after weak US data. The US ISM business activity index fell from 48.6 to 48.2. The Markit version of the indicator fell from 52.8 to 51.2.

Main news of the day (EET):

• 10:55, German labour market data;
• 11:30, UK construction activity;
• 12:00, Eurozone inflation;
• 14:00, New Zealand 155th dairy auction;
• 16:45, ISM (New York) manufacturing index for US.

Market Expectations:

Investor attention on Tuesday will be on German, UK, New Zealand and Eurozone data. The weekly and daily technical pictures are indicating a further fall for the euro against the US dollar and UK pound.

Technical Analysis:

• Intraday target maximum: 1.0838 (current Asian), minimum: 1.0781, close: 1.0805;
• Intraday volatility for last 10 weeks: 100 points (4 figures).

The euro/dollar has started the new year with fluctuations in all directions. The fall halted at the D3 line (lower limit of MA channel) and the support takes its beginnings from 4th December, 2015. The graphs on the old time frames indicate a fall for the euro. The D3 will be a support.

To define the nearest target for the week, we need to make a channel. Let’s put the 1.1059 and 1.0984 peaks (15th and 28th December) together and stick a parallel line at 1.0802 (17th December minimum). According to the channel at the lower limit, the closest target is 1.0700. My target for Tuesday is 1.0781.

Daily

The rate has broken from the trend line. The price just needs to strengthen below 1.0795 for the euro bears to open the road south to 1.0518. The daily indicators are showing a fall for the euro. The sellers need to get the price to close below 1.0794 even if it kills them. If the day closes above 1.0800, the oscillator stochastic will invert upwards and the flat will continue.

Weekly

The sellers are trying to break the 1.0794 support on the weekly. If they manage to do this within two days, we will be heading back to 1.0518 since the stochastic will be intersecting upwards.

Vladislav Antonov, Alpari

 

[Alpari]

Euro/Dollar: Fall of Euro to be Restrained Before FOMC Minutes

Hourly

Yesterday’s Trading:

Tuesday saw the euro/dollar fall to 1.0710. Pressure on the euro gathered strength after Eurozone inflation data came out. If we take into account that Saudi Arabia is increasing oil discounts for Europe, inflation will remain low for a long while. In this case, the ECB will have to take additional measures with regards to relaxing its monetary policy and this is to down the euro further.

Main news of the day (EET):

• From 10:15 to 11:00, EU nations’ December service PMIs;
• 11:30, UK December service sector business activity index;
• 12:00, Eurozone manufacturing inflation data;
• 16:45, US Markit service sector business activity index;
• 17:00, US ISM service sector business activity index, industrial order data;
• 17:30, US Ministry for Energy oil reserves;
• 21:15 EET, FOMC minutes.

Market Expectations:

In Asia the euro/dollar renewed to 1.0772 (45 degrees) due to sales of Australian and New Zealand currencies. Their sale was provoked by negative Chinese statistics. The Caixin PMI in the service sector for December fell from 51.2 to 50.2. The Aussie AiG service sector activity index also fell significantly.

The euro was trading around 1.0747 at 6:22 EET this morning. Today I’ve gone for a fall in the price to 1.0700. This will take place if the euro/pound passes 0.7311.

There’s no point in putting complete trust in my forecast since it’s unclear how market participants are going to act before the FOMC minutes come out. My forecasted scenario takes into account their past behaviour and how the indicators are set up at this moment in time. If we go off the daily timeframe, then the rate’s free to head to 1.0518.

Technical Analysis:

• Intraday target maximum: 1.0772 (current Asian), minimum: 1.0700, close: 1.0760;
• Intraday volatility for last 10 weeks: 100 points (4 figures).

The euro on Tuesday fell to the lower limit of the channel. From a minimum of 1.0710 it restored by 45 degrees to 1.0772. I think that the 1.0772 level will remain the session maximum throughout Wednesday. There’s no bull divergence on the AO indicator, meaning there will be another minimum. How deep the euro/dollar will sink today will depend on the euro/pound movements. The cross has stopped at the support. If 0.7310 can’t hold, then due to the overall strengthening of the dollar, there are risks we could see a depart beneath 1.0700.

Daily

The euro bulls have strengthened beneath 1.0795. Now the road southwards to 1.0518 is open. There could be some short term jumps upwards.

Weekly

The 1.0794 support has been broken. Because of the direction of the stochastic, I expect a return for the euro back to 1.0518.

Vladislav Antonov, Alpari

 

[Alpari]

Euro/Dollar Readying for Return to 1.0877

EURUSD 1 H

Yesterday’s Trading:

Yesterday the GBP fell throughout the market and forced the euro bulls to drop to 1.0819. The UK industrial manufacturing index fell to a three year low. Other key currencies followed the pound downwards. After trading closed in Europe, the euro/dollar returned to the LB at 1.0877.

When Chinese balance of trade data came out in the morning and the stock indices switched into the green, the euro/dollar renewed its minimum at 1.0810.

Main news of the day (EET):

• 12:00, Eurozone industrial manufacturing data for November;
• 17:00, US level of labour market vacancies and work force turnover for November;
• 17:30, US Ministry for Energy’s oil reserve report;
• 21:00, Fed Beige Book.

Market Expectations:

All I see for the end of today is a flat. In the first half of the day I expect to see the rate return to 1.0877 and then a sideways until Thursday. There is no important news planned for the euro. The oil reserve report could be a driver for the Canadian and this could put pressure on other currencies.

Technical Analysis:

• Intraday target maximum: 1.0877 (current Asian), minimum: 1.0810 (current Asian), close: 1.0845;
• Intraday volatility for last 10 weeks: 100 points (4 figures).

The euro stood at 1.0828 at 6:46 EET. Bull divergence has formed on the AO indicator. The stochastic has flipped downside up. The 1.0800 level is a decent support and the euro/pound cross could lend a hand too. Since the calendar is empty, my review is just for the European session.

EURGBP 1 H

Weak industrial manufacturing data from the UK has changed the trajectory for the cross. The euro/pound has lifted to 0.7547. Since the Chinese indices are trading up today, the euro/pound has corrected to 0.7469. I’ve come up with two separate scenarios for Wednesday. The first is for a growth with the possible formation of a triangle. Since the growth of the stock indices and the strengthening of the yuan is weak, a fall could resume at any moment. The second scenario is for the formation of a double top.

Daily

The euro/dollar has dropped to 1.0810 but didn’t close below 1.0802. There are risks we could head back to 1.0877 from the daily LB.

Weekly

The bears have returned the rate to 1.0810, but the intraday pattern for the past two days has a bullish twang to it. The situation remains unclear on the weekly.

Vladislav Antonov, Alpari

 

[Alpari]

Oil Perspectives for 2016 Part 1

A slowing in Chinese economic growth, a devaluation of the yuan, the constant increases in oil reserves and OPEC’s refusal to drop their extraction quota have caused oil prices to collapse once again. Since May the oil market has switched into a bear phase.

Additional pressure on prices has come from the oil extraction companies themselves: via their hedging of risk. They attempted to fix the oil price for themselves on the futures and options markets for future extraction. In this case, they receive the difference between the current price and any fall in prices. It’s worth noting that not all oil companies were hedging their risks via options since, when purchasing PUT options, one has to pay a premium.

The options were used by the big companies. As an example, every year Mexico hedges risks from the possible fall in oil prices. Expenses for insurance can be anywhere from $750 million to $1.2 billion. In this case, the banks which sold PUT options had to hedge their risks on the market by selling oil futures, thereby pushing prices further down.

All of the important events from 1997 are marked out on the graph. If there was data available on Brent quotes from 1980 then I would’ve had the graph start from 1980. This year was an important one since this is when Brent became the main benchmark for the formation of Russian export oil benchmarks (Urals, Siberian Light and REBCO).

There’s no point in commenting on each and every event. It’s clear from the comment boxes which events had an effect on the oil market. This graph could be used in the future as a cheat sheet for oil prices for the last 24 years. Now to the analysis.

The comments with a white background relate to fundamental events and those with grey backgrounds relate to technical analysis. The latter have been numbered.

In 2008 the price rocketed from a 36.20 USD minimum and recovered by 50% to $89.55. From here the important $89 marker takes its beginnings. By March 2012, a barrel of Brent was going for $128.37 due to a growth in oil demand in developing countries. Then the market formed a triangle over the course of a year and from this the price headed downwards (2). From this moment a new fall in oil prices began.

Take a look at the downward waves highlighted by ellipses from 2008 and 2014 (1). Between these years there were many interesting things going on with the price movement. First of all, the correlation between them is 61.8% (Fibonacci number). In 2008 the fall was 110.49 USD (75.32% to $36.20 and in 2014 it was by $70.51 (-60.95%) to $45.17. Now we find the correlation between the waves as (70.51 x 100) / 100.49 = 63.8 (the closest value to the 61.8% Fibonacci number). Secondly, the fall in prices began in July. Thirdly, oil prices fell right up until the end of the year and in January of the next year a rebound took place.

Amongst the factors mentioned there was reason for a rebound to take place last year. In 2015 a false break took place. After a pinbar was formed (3), growth in quotes was expected; as was the case in 2008. The pinbar came off perfect. The price restored to $60.16 and from here it returned back to the trend line (4).

At first the price broke the trend line (4) after an unsuccessful attempt to break from it and bring about a double bottom pattern (3). Then the December minimum from 2008 was rewritten: $36.20 (7).

After falling below the August minimum of $42.20, the Fibonacci level was broken last week: 200% (5) from the $128.37 to $88.47 downward wave with a reference point from $115.68 and a support zone formed from the years 2000 and 2003’s peaks (6). The instrument for expanding the Fibonacci can be applied when checking the waves for completeness in proportional analysis (correlation of Elliot waves).

2015 closed down as well and the growth only renewed on 14th January. 2009 began with a growth from market opening. Note that when $36.20 was reached in 2008, the media was coming out with forecasts of $20-25 per barrel, as is the case right now. When it became clear for all to see that oil futures should only be for sale, the market turned against the crowds.

 

[Alpari]

Oil Perspectives for 2016 Part 2

2016 also opened down and the sellers updated the minimum over the holiday period. Oil cheapened due to a crash of the Chinese stock markets. Since the analysis has been done on a monthly time frame, in order to see a signal for a downward correction, we need to wait for the formation of a pinbar (hammer) or a candle formation for bull divergence as the month closes.

From the right hand side of the graph at the top, there’s a statistic from the year 2000. Many will wonder whether a seasonal factor was involved in December and January. And so, in 8 of 16 years oil has cheapened and closed up by the same amount. In January oil closed up eight times and down seven times. If these figures are grouped and checked for alternation, it turns out that there is absolutely no link between the figures and the months of December and January. Oil in January can jump sharply up, just as it can fall sharply.

Now to the important technical levels. One of them is $24. From 1991 to 1999 it has been a resistance and from 1999 to 2001 it has been a support (8).

OPEC doesn’t want to drop its oil extraction quotas. The bears are dominating the market. The US Fed has started to increase its rates. It seems that there are no current signals for a rise in prices. However, what will happen if the Chinese stock markets suddenly stop falling and switch into a growth phase? Whilst statistical institutes are locked in currency wars and are manipulating the markets, constantly tinkering with previous values, there is no trusting the statistical data that comes out.

The OPEC countries are now vying for their share of the market and trying to edge out their competitors. So what will be if the cartel unexpectedly drops its oil extraction quotas? Not many people are in the loop as to what is said at the negotiation table and what will happen in 2016. Although, we do know how the market operates. 5-10% of the players are taking money off the remaining 90-95%. Before the big players do a U-turn, they will sell up to the crowds. For this to take place, there needs to be an informational background from the media to say that oil will fall to $10 and 90% need to believe this will happen.

 

[Alpari]

Oil Perspectives for 2016 Part 3

So here it’s worth keeping an eye on the positions of these big fish by taking a look at the COT (Commitments of Traders). It is published once per week, on Fridays, by the CFTC (US Commodity Futures Trading Commission).


For a comparison, we’ll take two reports on WTI since the volume on them is larger than that of Brent. The first is for the 24th June, 2014 when the market began to drop and the latter is for the 5th January, 2016. Back then, the figures stood at 2.317 million contracts and now they are at 2.335 million (+0.77%). At the same time, the structure of positions has changed. Between 24th June, 2014 and 5th January, 2016, big players have reduced their long positions from 548,476 to 479,540 (-12.5%) and increased their short positions from 68,737 to 261,293 (+280%). Meanwhile, locked positions are up 8%.


Looking at the hedgers we see the opposite. They have increased their long and cut their short positions. In 2008 there was a build-up of long positions from October and the growth began in January 2009.


As an example let’s look at cycles on the monthly. A correction began on 25th-28th January. Seasonal cyclic reoccurrence (365 days) indicates a market inversion starting on 12th January. There is yet one more factor which points to a market inversion for oil prices: a positive annual correlation of 2015 with 1993 (93%) and 2008 (78.9%). After these years oil prices increased.


Taking all of the factors indicated above into account, there are two scenarios on the cards. The first is a rebound after the formation of a pinbar at the close of January. The second is a fall to $224 and a renewal to 1999’s trend line (4). Click on the graph to enlarge it.



Vladislav Antonov, Alpari

 

[Alpari]

Euro Could Return to 1.0930

EURUSD 1H

Yesterday’s Trading:

The euro/dollar on Thursday formed a spike. The strengthening of the euro to 1.0942 was caused by Reuters and a fall in European stock indices. Reuters relayed that the majority of ECB representatives are against a further loosening of monetary policy and at that moment the stock indices were trading down by 2-3%.

In the second half of the day the euro weakened against the dollar due to a rise in oil prices, a rise in US stock indices and a fall in the euro/pound cross after the BoE convened.

Brent was up to $31.16 per barrel. The Bank of England kept its interest rate at 0.5% and its asset purchasing program at 375 billion GBP. The indices were up by about 1.5%.

The number of initial unemployment benefit applications in the US for the week was up from 277k to 284k.

Main news of the day (EET):

• 12:00, Eurozone November balance of trade;
• 15:30, US December retail sales, manufacturing activity index from NY Fed for January, December PMI;
• 16:00, FOMC member Dudley to speak;
• 16:15, US industrial manufacturing data for December;
• 17:00, Reuters/Michigan consumer confidence index for December.

Market Expectations:

Trader attention on Friday will be on stock indices’ movements, in addition to US fundamental data. The Japanese Nikkei 225 and the Shanghai Composite are trading in the red zone. Oil is down slightly.

If the European indices head down following Asia, the euro will strengthen against the dollar to 1.0909. In my forecast I’ve gone for a sideways until US trading and then a growth of the euro. Monday is Martin Luther King Day in the US, so the stock indices will be able to take a break and this will give the euro room to rise.

Technical Analysis:

• Intraday target maximum: 1.0915/30, minimum: 1.0854 (current Asian), close: 1.0895/1.0900;
• Intraday volatility for last 10 weeks: 100 points (4 figures).

The euro/dollar has corrected by 45 degrees (Gann levels) from a minimum of 1.0834. I expect it to close up today. The reason for the euro’s strengthening is written above. It would be decent if the pair can stick out the American session near the balance line (55 average). I expect to see a rise from here to about 1.0915/30.

EURGBP 1H

On Thursday the euro/pound cross rose to 0.7606. After the Bank of England convened it dropped to the LB. When the price is near the balance line, it means it is ready to deviate from it by 0.6 or 1%. Since I expect to see a fall of the US stock indices today before the extended weekend, my scenario for the euro/pound and the euro/dollar are looking up.

Daily

Due to yesterday’s spike-formed price pattern, the situation is ambiguous once again.

Weekly

A flat is visible on the weekly for six straight weeks. We need to wait for the weekly candle to close.

Vladislav Antonov, Alpari

 

[Alpari]

V-shaped Pattern Expected for Euro on Tuesday


EURUSD 1H

Yesterday’s Trading:
On Monday the euro/dollar spent the day below 1.0900 due to Martin Luther King day in the US. The stock market situation stabilised. Market participants weren’t active as the release of Chinese stats approached.
Main news of the day (EET):

• 09:00, German December CPI;
• 11:00, Eurozone November balance of payments changes;
• 11:30, UK retail sales, PMI and CPI for December;
• 12:00, Eurozone business sentiment for January from ZEW and November CPI. German ZEW business sentiment;
• 14:00, BoE governor Carney to speak;
• 17:00, US housing market index from NAHB for January.

Market Expectations:
China published some data on GDP, industrial manufacturing volume and retail sales. Chinese GDP in 2015 slowed to 6.9% YoY against 7.3% in 2014. The data was as forecasted.
Industrial manufacturing volumes and retail sales were 5.9% and 11.1% against a forecasted 6.0% and 11.3%. The market hardly flinched on news of the data. This just confirms that market participants are having doubts about the dependability and credibility of the statistical data. The stock markets in this case are a better indicator for China. By 06:47 EET they were all up by 1.5% on average.
Trader attention on Tuesday will be on German and UK economic data. A V-shaped pattern with a 1.0854 minimum at 112 degrees is what I have for my forecast.
Technical Analysis:

• Intraday target maximum: 1.0904 (current Asian), minimum: 1.0852, close: 1.0887;
• Intraday volatility for last 10 weeks: 100 points (4 figures).

The euro/dollar is trading at around 1.0885. The price is near the trend line. Since the Asian stock indices are in the green zone and oil is in the red, in my forecast I’ve gone for a fall of the euro to 1.0854 with a subsequent rebound to 1.0887. I’ve gone for a fall due to the euro/pound cross.

EURGBP 1H

The stock market situation has stabilised. I expect the euro/dollar to fall before the ECB convenes. Due to this, I reckon the euro will be under pressure during the first half of today. According to the pattern, something should similar to yesterday should happen.

Daily

The situation isn’t clear on the timeframe.

Weekly

The stochastic indicator and the AC are facing down and the CCI is facing up. There are risks we could see a return to 1.0820.

Source: alpari.com, "V-shaped Pattern Expected for Euro on Tuesday"
Source: alpari.com, "V-shaped Pattern Expected for Euro on Tuesday"

 

[Alpari]

Euro Trying to Break Daily Trend Line


EURUSD 1H

Yesterday’s Trading:
Tuesday’s trading in the States closed with the euro/dollar at 1.0858. The euro dropped to this level due to stock indices and oil prices rising.
The euro strengthened during the American session because of oil and a sharp U-turn for the euro/pound after the Bank of England’s governor Carney gave a speech. He noted that the UK economy is weak and that now is not the time to raise interest rates. The pound crumbled against the dollar with his words by a total of 150 points. The euro/dollar had risen to 1.0938 by the end of the day.
Main news of the day (EET):

• 09:00, German December PMI;
• 11:30, UK labour market data: average wages for November, changes in unemployment benefit applications for December, November unemployment level;
• 15:30, Canadian whole-sale and manufacturing sales for November
• 15:30, US construction permits and CPI;
• 17:00 BoC interest rate;
• 18:15, BoC press conference.

Market Expectations:
The euro/dollar is up in Asia due to a fall in Asian stock indices and oil prices. At 06:40 EET, EUR/USD was going for 1.0948. The Shanghai Composite was down 1.37%, the Hang Seng was down 3.77% and Brent stood at $28.11.
The euro updated its maximum against the dollar and pound, but we can’t really say that it will rise higher. Keep watch of the European stock indices and the euro/pound. The cross is in the sell zone. Don’t forget that the ECB is convening on Thursday, along with Draghi holding a press conference. Many market participants want to close long positions before the press conference since if there’s any word on further easing of monetary policy, stops will be set off. If the indices and oil rise in Europe, the euro/dollar will return to 1.0900.
Technical Analysis:

• Intraday target maximum: 1.0962, minimum: 1.0899, close: 1.0920;
• Intraday volatility for last 10 weeks: 100 points (4 figures).

The euro/dollar is trading at around 1.0948. I’m waiting for a test of the 90th degree when trades open in Europe and a turnaround downwards. I’m not sure whether the European indices will follow the Asian indices by falling. In any case, there will be a reaction. As the ECB meeting and Draghi’s press conference approaches, I expect to see the euro return from 1.0960 to the LB or 67th degree at 1.0899.

EURGBP 1H
The euro/pound cross is sharply up after Mark Carney spoke and a fall in oil prices. The euro is up against the pound due to a fall in the Asian indices. The price is out of the channel and the indicators are saying sell euro. On Wednesday I’m sticking with a fall in the cross to the LB. Be careful with euro purchases, even if European indices fall. You may head into the positive, but the risks of catching a stop are high.

Daily
The euro bulls are trying to break through the trend line. Their success will depend on stock indices movements.

Weekly
The euro is trying to return to 1.1059.

Vladislav Antonov, Alpari
Source: alpari.com, "Euro Trying to Break Daily Trend Line"
Source: alpari.com, "Euro Trying to Break Daily Trend Line"

 

[Alpari]

Mark Carney Could Affect the Euro via Euro/Pound Cross


EURUSD 1H

Yesterday’s Trading:
The euro/dollar on Monday was up to 1.0856. The movement went against that of Friday. The euro received support from falling stock indices and oil prices. It’s a mystery to me how falling oil prices can have a negative effect on indices or oil indices.
Market participant activity was low. Traders are waiting for the results of the US FOMC meeting which is set for Wednesday.
Main news of the day (EET):

• 12:45, BoE’s Carney to speak;
• 16:45, US Markit service sector activeness index for January;
• 17:00, January consumer confidence and manufacturing index from the Richmond Fed.

Market Expectations:
The economic calendar on Monday was empty and there’s not much planned for Tuesday either. No one expects to see rates lifted again. The announcements following the meeting will be important. I think the regulator will carefully word what it says in order not to rock the boat.
From today’s events it’s worth having a listen to what the BoE’s Mark Carney has to say. He is set to say something about a financial stability report and he could mention interest rates. I expect the euro/dollar to slide to 1.0815 on Tuesday.
Technical Analysis:

• Intraday target maximum: 1.0862, minimum: 1.0815, close: 1.0825;
• Intraday volatility for last 10 weeks: 100 points (4 figures).

The euro/dollar was trading at 1.0845 at 6:29 EET. The price has restored from a 1.0788 minimum by 67 degrees to 1.0858. I expect the euro to return to 1.0815.
The majority of Asian indices are in the red zone, so the euro could update the maximum at trade opening in Europe. Afterwards things will stabilise and the euro will head as forecasted.

EURGBP 1H

The euro/pound has returned to the LB. Due to a rise in the euro/dollar it could lift all the way to the 67th degree. Today I expect the cross to fall to the LB. The hourly indicators are overloaded, so the euro will find it hard to strengthen against the pound.
Carney is speaking at 12:45 EET. He is the only person who can annul the technical signals. I haven’t taken his speech into account in my forecast.

Daily
The euro/dollar has broken away from the trend line due to a fall in the stock indices. The fight is ongoing near the balance line. The AO is in the neutral zone. The stochastic and the CCI are in euro buy zones. Any news could provoke a powerful movement in the pair. Although, it’s unclear what news will be the driver for real fluctuations.

Weekly
No comment.

Vladislav Antonov, Alpari
Source: alpari.com, "Mark Carney Could Affect the Euro via Euro/Pound Cross"
Source: alpari.com, "Mark Carney Could Affect the Euro via Euro/Pound Cross"
Source: alpari.com, "Mark Carney Could Affect the Euro via Euro/Pound Cro

 

[Alpari]

Euro Expected to Rise to 1.0895 before the Fed Meeting


EURUSD 1H

Yesterday’s Trading:
My euro expectations were fulfilled on Tuesday. The euro updated its maximum against the USD during European trades, dropping to 1.0818 and then returning to 1.0868. The only thing that didn’t fit with my forecast was what happened at the end: the close price was higher than I thought it would be.
The maximum was updated after a fall in European stock indices which followed the Chinese ones. The Shanghai composite fell by 6.72% to 2,749.79 due to a continuation of capital flight from China. This capital flight reached $1 trillion last year due to the devaluation of the yuan, a slowing of Chinese economic growth and a fall of the stock market.
Pressure on the euro came from a rise in oil prices and a fall in the euro/pound cross. The Iraqi oil minister and the OPEC representative for Kuwait hinted that the organization is ready to reduce quotas in order to stabilize the price. That is, of course, if other countries which are not part of the cartel follow suit.
The US consumer confidence index for January stood at 98.1 (forecasted: 97.0, previous: reassessed from 96.5 to 96.3).
Main news of the day (EET):

• 09:00, German consumer confidence from GfK for February, Swiss consumer activeness from UBS for December. UK housing price index;
• 09:45, French consumer confidence in January;
• 17:30, US data on oil reserves from the Ministry for Energy;
• 21:00, Fed decision on interest rates announced along with further words from the FOMC;
• 22:00 New Zealand interest rate decision and announcement from RBNZ.

Market Expectations:
Today’s key event is the FOMC meeting. No one expects the Fed to up the rates. Market participant interest will be on the monetary policy announcement. The tone of the announcement will set the direction for the dollar for the coming two months. A soft tone will cause a weakening and a hard tone will cause a strengthening.
Technical Analysis:

• Intraday target maximum: n/a, minimum: n/a, close: n/a;
• Intraday volatility for last 10 weeks: 100 points (4 figures).

The euro/dollar was trading at 1.0863 at 06:26 EET. The Shanghai Composite had lost 2.8%. It’s likely that the European indices will open with a fall, thereby supporting the euro.
US oil reserves, according to the US institute for oil, were sharply up last week by 11.4 million barrels. Oil prices didn’t react much to the report, but the fall could continue during the European session. Due to this I expect a rise in the euro to 1.0895 with a correction to follow as part of preparations for the FOMC meeting.

EURGBP 1H

The euro/pound is down to 0.7549. The price has corrected by 76.4%. Taking the API data and the Asian stock market indices’ movement into account, I expect the price to restore to 0.7625. A growth in the cross will offer support to the euro in its pair with the dollar.
Source: alpari.com, "Euro Expected to Rise to 1.0895 before the Fed Meeting"

Daily

The euro/dollar has broken away from the trend line and is continuing to move slowly towards the trend line. Based on the set up, the euro bulls intend to test 1.0950. The dot above the i will be the words of the US Fed after the FOMC meeting.

Weekly

No comment.

Vladislav Antonov, Alpari
Source: alpari.com, "Euro Expected to Rise to 1.0895 before the Fed Meeting"
Source: alpari.com, "Euro Expected to Rise to 1.0895 before the Fed Meeting"

 

[Alpari]

Gold Price Hits 3-Month High

From the beginning of the year there has been some anti-synchronisation between gold and the dollar, which usually have a strong negative correlation: as the dollar rises, the general rule is that gold falls and vice-versa. However, since the beginning of the year, the DXY and gold have developed a positive correlation by both being in upward channels. Although, if we take a shorter time frame on the graph, we can this golden dollar rule not being broken; since the start of this week, a rise in gold has meant a fall for the dollar.

The DXY dollar index is in a horizontal channel between 98.17 and 99.80. The range is an upward heading one, inside of which the dollar has dropped from the upper limit, testing the lower limit of the channel over the last week. If the bottom of the channel is broken, the DXY could head for 98.17, a value which it was at on 7th January.

The last Fed meeting didn’t have any real effect on the dollar. The US regulator did as expected and left rates unchanged, signalling a rise of anxiety regarding high volatility on global financial markets and a slowing of economic growth worldwide. The announcement which accompanied the Fed’s decision kicked up worries that the central bank will raise rates at its next meeting which is set to take place on 15-16thMarch. The likelihood of a rise in the rates at this next meeting is assessed at 25% by the futures market.

The intention to lift rates that was made clear in December was based on the fact that the Fed expects to see further strengthening of the US economy. However, judging by their recent announcement, they aren’t so sure about it. The regulator noted in its press release that the “Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.”

This statement caught the attention of the markets which were looking to spot any signal of Fed uncertainty. At the December session they had expressed certitude that the labor market was improving and that inflation would rise to their 2% target level. Now the FOMC are beginning to wonder whether they need to reassess their inflation forecasts and drop them, along with those of economic growth and employment at their next meeting.

Another reliable indicator for their incertitude comes from the Fed declining to assess the risks which threaten the economy and its prospects. The central bank officials usually give the markets something to orient their actions on, indicating whether the risks are balanced, in favor of inflation, or whether there is a good chance of economic growth. This time they gave no assessment and this happens very rarely. The last time they didn’t do so was in September of 2007, smack bang before the beginning of the financial crisis.

Meanwhile, there’s hardly cause for alarm as the Fed bosses still forecast the US economy to continue its moderate growth, with job creation and gradual inflation at a comfortable 2%.

A slowing of Chinese growth and instability on the world’s stock and commodity markets could be temporary just as it could be a sign of long term problems. Doubts about this have been tormenting the Federal Reserve since August of last year when the fall of Chinese stock indices and a devaluation of the yuan led to world markets feeling the pain. Back then by the way, they didn’t bother upping their interest rates. When the markets calmed down a little, the rates were lifted and now the turbulence on the market has returned it has put the US central bank in a difficult position, once again forcing them to assess threats to the economy.

In December the Fed forecasted a 0.25% hike in rates four times this year, but their most recent market assessment puts the number of rises at a lesser amount. If the central bank followed its initial plan, the rate should rise to 1.375% by the year’s end. Futures markets reckon that it will be 0.605% at the end of 2016, meaning that the rate will be lifted just once this year, but this is hardly a sure thing.

As for gold, without waiting for any tightening of US monetary policy it has decided to rise, lifting from $1,071 to $1,128 for a troy ounce in the last couple of weeks. This is its highest price level since November of last year. Theoretically, on the medium-term horizon we could see a revival of prices to around $1,190 which is a maximum from the middle of October last year. However, our long-term forecast remains as it was: depending on the Fed’s actions and dollar growth, gold, despite its “eternal value,” will continue to fall.

Vadim Iossub, Alpari

 

[Alpari]

Expected Test of 1.0930/40

EURUSD 1H

Yesterday’s Trading:

The euro/dollar slid to the balance line by at 1.0885 by American opening on Monday. After varying US data came out, the euro strengthened to 1.0912 against the dollar. The PMI and ISM in the manufacturing sector were in different directions. The PMI was down and the ISM was in line with forecasts, but December’s value was reassessed downwards.

The US business activeness index was set at 48.2 against 48.0 (reassessed from 48.2) the previous month (forecasted: 48.1). The US business activeness index from Markit was down from 52.7 to 52.4 (forecasted: 52.7).

Main news of the day (EET):

• 10:55, German unemployment changes and unemployment level for January;
• 11:30, UK business activity index in the construction sector for January;
• 12:00, Eurozone unemployment level and PMI for December. SNB’s chairman Jordan to speak.

Market Expectations:

Trader attention on Tuesday is on German, UK and Eurozone data. The euro broke from the trend line. It is currently passing through 1.0935. I expect a growth of the rate to here by the close of the European session. On Monday the cross created some interference for the buyers and today it could lend them some support if we see a restoral.

Technical Analysis:

• Intraday target maximum: 1.0940, minimum: 1.0883 (current Asian), close: 1.0912;
• Intraday volatility for last 10 weeks: 102 points (4 figures).

The euro/dollar was trading at 1.0909 at 06:31 EET. Yesterday I wrote that we could see a break in the 1.0980 resistance if the rate reaches 1.0920.

Today the euro/dollar is in the hands of the buyers. The price is bouncing sharply from 90 degrees (Gann level) so it’s worth expecting the pair lifting to 1.0935/40.

EURGBP 1H

The euro weakened yesterday against the pound to 0.7540. I don’t understand why the cross is acting like it is with the prices of oil and stock indices falling. The euro should strengthen faster than the pound against the dollar. As such, the cross should also rise. On Tuesday I reckon we’ll see a rise of the euro to yesterday’s 0.7620 maximum.

Daily

The price has bounced from the trend line. With a growth in the rate to 1.0938, we should prepare for a break in 1.0980/85 and a rise in the pair to 1.1025.

Weekly

Nothing has changed on the weekly: the euro dollar is still trading in a sideways.

Vladislav Antonov, Alpari

 

[Alpari]

Euro Ready to Pass 1.0950 Resistance

EURUSD 1H

Yesterday’s Trading:

My Tuesday’s expectations came off in full. The euro/dollar fell one point short of the 1.0940 target. The falling stock indices and oil prices helped the euro strengthen.

The European stock indices fell by 2% on average and the US ones fell from between 1.9% and 2.3%. Brent fell 4.5% to $32.50. The price of oil came under pressure after the National Iranian Oil Company’s (NIOC) CEO Javadi came out saying that Iran is to up its exports to 2.3 million barrels per day this year.

Main news of the day (EET):

• 10:15 – 11:00, service sector PMI (Spain, Italy, Germany, France, Eurozone);
• 11:30, UK service sector PMI;
• 12:00, Eurozone December retail sales;
• 15:15, US ADP January employment changes;
• 16:45, US service sector PMI from Markit for January;
• 17:00, ISM January business activity index;
• 17:30, US oil reserve changes.

Market Expectations:

The main news for today is the UK PMI and ADP, in addition to PMI and ISM data from the US. As soon as the euro/pound cross U-turns upwards, I expect to see a break in the trend line.

Technical Analysis:

• Intraday target maximum: 1.0962, minimum: 1.0896, close: 1.0928;
• Intraday volatility for last 10 weeks: 102 points (4 figures).

The euro/dollar is trading close to the LB. On my forecast I’ve gone for a fall in the euro to 1.0896/1.0900, with a subsequent rebound to 1.0962. If the rate doesn’t recoil from 1.0900, ready yourselves for a flat until Thursday. If we see a fall below 1.0890, the euro will head for 1.0860.

EURGBP 1H

The euro/pound hasn’t strayed too far from the balance line. For Wednesday I reckon we’ll see a growth to the U2 at 0.7618. At European trade opening there are risks the rate will fall to 0.7558. The euro’s weak point will be when the UK PMI comes out. If the data is strong, the euro will be under pressure. If it’s weak then the euro/pound will shoot up and support the euro as it did yesterday.

Daily

The price stopped by the trend line. I expect a break on Wednesday. A break of the trend won’t cause interference. A growth above 1.0985 will leave 1.1025 as a target level.

Weekly

The euro/dollar will stay in a sideways but I’m waiting for an upwards shoot.

Vladislav Antonov, Alpari

 

[Alpari]

Euro Correction Expected After Break in Trend Line

EURUSD 1H

Yesterday’s Trading:

In mid-December the euro bulls didn’t manage to strengthen above 1.10. Now they are in jubilation on part of New York Fed chief Dudley who helped them pass the important technical levels and pop the stops off the sellers’ short positions.

All Dudley had to say was that a strong dollar is the Fed’s, the economy’s and US companies’ main problem and then the speculators began selling US dollar.

At first the 1.0950 resistance was passed, then the main trend line which took its beginnings from the 1.1712 maximum and passed through 1.1045.

The dollar cheapened, despite strong private sector employment data from the US. The data came out better than expected with employment creation in January at 205k (forecasted: 200k, previous: 267k). The previous value was reassessed up from 257k. The official report is out on Friday.

US service PMI from Markit and ISM came out less than expected and in doing so pushed the dollar down further. Now market participants are placing their bets on only one or two interest rate rises this year, instead of the four that they previously expected. The euro/dollar rose to 1.1145 and, according to recent quotes, is trading around 1.1084.

Main news of the day (EET):

• 10:00, ECB’s Draghi to speak;
• 11:00, ECB publishing its economic bulletin;
• 14:00, BoE interest rate decision (0.5%), minutes and asset purchasing program (£375 billion);
• 14:45, BoE governor Carney to speak;
• 15:30, US unemployment benefit applications;
• 17:00, PMI.

Market Expectations:

In the first half of Thursday trader attention will be on the Bank of England minutes and the ECB economic bulletin. In the evening there will be data on unemployment benefit applications. On Friday will be the Non-Farm Payrolls. Taking into account that the euro has been in the oversell zone and way off the channel for a few hours, today I think we’ll see a correction of the pair to the balance line at 1.1050/45. It is the NFP that makes me think that we will see a rebound today.

Technical Analysis:

• Intraday target maximum: 1.1120, minimum: 1.1050, close: 1.1080;
• Intraday volatility for last 10 weeks: 102 points (4 figures).

Today’s key event for the currency market is the Bank of England’s minutes. Expectations are for an 8-1 vote (keep – rise). Due to this, I expect the cross to fall in the second half of the day, putting pressure on the euro/dollar.

The price is now above the U3. The rate could return to 1.1120 from 1.1070. There is to be growth for partial profit fixation from long positions before the NFP. By the close of the European session I expect to have seen a fall to 1.1045/50. When the price meets the balance line on the hourly, the market will be balanced. Then traders will be waiting for the US labour market report.

EURGBP 1H

The fall was stronger due to UK stats, but on the whole my expectations rang true. A growth of the cross aided the euro/dollar to pass the 1.0950 resistance and the trend line at 1.1045. After the publication of the BoE’s minutes on Thursday, I expect to see a weakening of the euro against the pound. The fall of the cross will have a negative effect on the euro/dollar.

Daily

The euro/dollar has broken two trend lines and exceeded the December maximum from last year. Now the buyers have the road open to 1.1470. Today there should be a correctional phase. Let’s see what the market cooks up after the Bank of England has convened and the NFP is out.

Weekly

The euro/dollar has headed for the heavens. The closest target is 1.1240. If there’s no rebound, it means we’re off to 1.1494 (October 2015 maximum).

Vladislav Antonov, Alpari

 

[Alpari]

Euro/Dollar Expected Fall to 1.1168/70 in First Half of Day

EURUSD 1H

Yesterday’s Trading:

A fall in the oil and stock indices has facilitated a fall in the dollar/yen to 114.20 and a rise of gold to $1,200 per troy ounce. The euro has strengthened against the dollar to 1.1215. The rate rose to 1.1237 in Asia.

The markets are closed for a week in China. Falling oil prices as more reserve reports are set to come out is putting pressure on the stock markets and bonds. The market is in a turbulent zone. The Nikkei 225 has fallen 5% this morning.

Main news of the day (EET):

• 09:00, German industrial production and balance of trade for December;
• 11:30, UK December balance of trade, BoE’s financial stability deputy governor, Jon Cunliffe, to speak.

Market Expectations:

The calendar is empty today. Trader attention is on Janet Yellen who is set to speak tomorrow and Thursday (17:00 EET). If she signals that the Fed is to wait and see whether to put up rates this year and not be neutral, the euro/dollar will shoot up. If the Fed chief is neutral, the market will sit in a sideways with sharp fluctuations up and down.

Technical Analysis:

• Intraday target maximum: 1.1242, minimum: 1.1168, close: 1.1200;
• Intraday volatility for last 10 weeks: 102 points (4 figures).

A complex wave structure has formed on the hourly period above 1.10. The resistance zone passes through 1.1238-1.1244. If we take a look at the channel, we may have a price blowout to 1.1258.

The euro/pound has bounced from the D3 and formed a pinbar. If the European indices don’t fall following the Nikkei 225, a downward correction will begin. The correction on the euro/pound will cause a downward movement on the euro/dollar. Volatility is high so the price could quickly head down to 1.1168 and then return back. So could the euro weaken against the dollar to 1.11? It could we do. Keep an eye on the stock indices and oil.

EURGBP 1H

A running from risks has caused a rise in demand for euro throughout the market. The euro/pound bounced from the LB and rose to the MA U3. I expect to see a recoil to the LB on Tuesday, just as we saw on 5th February.

Daily

euro sell signal is still forming on the stochastic. The CCI indicator is nearing the +100 limit. If the stock indices fall hastens, the technical signals won’t work off and the euro/dollar will depart to 1.1370. If we go off the indicators used on the graph then it’s risky to sell euro.

Weekly

The euro/dollar will shift to 1.1366/70. The sellers can’t stop the euro from strengthening. The fall of the stock indices is supporting the buyers.

Vladislav Antonov, Alpari