EUR/USD: price hovering around the trend line
Trading on the euro on Thursday closed up. After Draghi's press conference, the euro restored to 1.0615. The head of the ECB gave the impression that the regulator may not need to provide any further stimulus for the revitalisation of the European economy. The ECB left its monetary policy unchanged and maintained its monthly net purchases in public and private sector securities at 80 billion EUR until the end of March.
From April to December 2017, this figure will amount to 60 billion EUR a month on average. The ECB also upgraded its GDP and inflation forecasts for the Eurozone in 2017 and 2018.
Today, traders' attention will be directed towards America's non-farm payrolls (NFP). A positive report could increase expectations of a rate hike by the Fed on the 15th of March.
According to CME Group's FedWatch, as of the 9th of March, the probability of a rate hike this month is still 90.8%. For May, this probability has risen from 91.4% to 91.8% and for June from 95.8% to 95.9%.
Before the report is released, some growth to around 1.0610 is likely. As we get closer to the report's release, it is expected that the price will stabilise around the 1.0599 mark. We also shouldn't rule out a rise in US bond yields. On Thursday, US 10Y bond yields grew to 2.613% (up 2.07% from 09/03/17). In Asia, bond yields rose by 0.64% to 2.615%.
- 10:00 Germany: trade balance (Jan);
- 12:30 UK: industrial production (Jan), manufacturing production (Jan), consumer inflation expectations, trade balance (Jan);
- 16:30 Canada: net change in employment (Feb), unemployment rate (Feb); USA: average hourly earnings (Feb), unemployment rate (Feb), nonfarm payrolls (Feb);
- 18:00 UK: NIESR GDP estimate (Dec-Feb);
- 22:00 USA: monthly budget statement (Feb)
Intraday forecast: low; n/a, high: n/a, close: n/a.
The euro closed up on Thursday. After Draghi's speech, the scales tipped in buyers' favour. The market has prepared itself for a rate hike on the 15th of March. Nothing is stopping the euro from rising towards 1.0675. If the Fed doesn't raise interest rates on Wednesday, then the euro should reach 1.0800 within a couple of days. The NFP report should give us an indication as to what decision the Fed will take.
My forecast only goes as far as 16:30. Within this period, I'm expecting some growth to 1.0610 followed by a stabilisation at around 1.0600. Keep an eye on the EUR/GBP cross. If profits from long positions suddenly become fixed, the EUR/USD will fall to 1.05800. Cyclical analysis suggests a strengthening of the euro up until 16:30 EET. Still, it's unclear whether or not the cycles from the hourly chart will coincide with the NFP.
Positives for the euro (+):
(+) US president Donald Trump favours a weaker dollar;
(+) The threshold for acceptable US government debt of 20.1 trillion USD may be reached by March this year. This will create headaches for new US president Donald Trump. A new law on the debt ceiling will come into force on the 16th of March 2017;
(+) The Greek government has made some progress in its talks with international creditors on the second stage of their reform program;
(+) Head of the ECB, Mario Draghi, has hinted that the central bank may not need to provide any further stimulus to revitalise Europe's economy.
(+) According to data from 28/02/17, large speculators on the Chicago Exchange have increased their short and long positions. Long positions have grown by 10,546 to 142,762 contracts, while short positions have grown by 4,293 to 187,304 contracts. Net short positions have fallen from 50,779 to 44,542 contracts.
(+) German 10-year bond yields: 0.425% (up 15.17% from 09/03/17);
(+) EURGBP (W): the CCI (20), AC and the Stochastic (5,3,3) are moving upwards;
(+) EURGBP (D): the AO is moving upwards. The trend line has been broken through;
(+) EURUSD (M): the Stochastic (5,3,3) is moving upwards;
(+) EURUSD (D): The AC, AO, and CCI (20) indicators are moving upwards;
Negatives for the euro (-):
(-) According to CME Group's FedWatch Tool, as of Thursday the 9th of March, the probability of a rate hike in March has remained at 90.8%. the probability of a rate hike in May has risen from 91.4% to 91.8, and in June from 95.8% to 95.9%;
(-) There's a high level of political uncertainty in Europe (French elections and Brexit). Ex-Prime Minister Alain Juppe has ruled himself out of participation in the French presidential elections;
(-) On Wednesday the 8th of March, leading up to the release of NFP data, some very positive figures came out of the ADP report;
Technical factors (short-term):
(-) According to data from 28/02/17, small speculators have increased their short positions by 1,481 contracts and reduced their long positions by 210;
(-) US 10-year bond yields have risen to 2.613% (up 2.07% from 09/03/17). In Asia, yields have risen by 0.64% to 2.615%;
(-) Long/short ratio according to myfxbook as of 7:30 EET: 46%/53%, lots: 15330/17193 (previous day: 11000/23800), positions: (previous day: 30156/55841)
(-) EURUSD (W): The Stochastic (5,3,3), AO, AC, and CCI indicators are moving downwards;
(-) EURUSD (D): The price is currently under the trend line. A rebound is possible after the NFP is released;
(-) EURGBP (D): the AC and CCI (20) indicators are moving downwards;
Built into the price:
(-) President of the Philadelphia Fed, Patrick Harker, has hinted at a rate hike in March;
(-) President of the Dallas Fed, Kaplan, says that it's better to raise rates sooner rather than later;
(-) President of the San Francisco Fed, John Williams, says that March is a good time for the FOMC to seriously consider a rate hike;
(-) FOMC member Lael Brainard says that the US economy is growing, and that a rate hike would soon be appropriate;
(-) Head of the FOMC, Janet Yellen, has said that interest rates might be raised in March;
(-) Head of the Fed in Richmond, Lacker, has said that losing control over inflation could prove very costly;
(-) Vice-president of the Federal Reserve, Stanley Fischer, echoes his colleagues' comments about rate hikes;
(+) François Bayrou, leader of the "Democratic Movement" party, has ruled out running for the presidency and thrown his weight behind independent candidate Emmanuel Macron;
(+) Marine Le Pen has had her EU parliamentary immunity from prosecution lifted for political reasons.