By Gabriel Ojimadu, Alpari
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On Wednesday, Donald Trump staged a verbal intervention against the strengthening of the US dollar, bringing it down in the process. On Thursday, the dollar recovered its losses. The EUR/USD rate fell from 1.0678 to 1.0609, bringing the Euro down just before the long weekend.
Market expectations:
On Friday the 14th of April, many trading floors across Europe and the United States will be closed due to Good Friday. Catholics celebrate this day in remembrance of Jesus Christ, who had been condemned to death, and on this day, was taken down from the cross and laid to rest. There will be no stock or bond trading today.
Trader activity and trade volume will be low today, although volatility could rise.
Day’s news (GMT+3):
Free Reports:
EURUSD rate on the hourly. Source: TradingView
Intraday forecast: low: 1.0604, high: 1.0633, close: 1.0625.
The Euro closed down on Thursday. It fell from a high of 1.0678 to 1.0609. At the time of writing this review, the Euro is trading between the 45th and 67th degrees under the lb balance line.
Today (Friday), the US debt and commodities markets are closed (oil, gold). Traders have nothing to base their decisions on today. Volumes will be vastly reduced.
In my forecast, I’m expecting the support at 1.0603 to be tested and to see the price restore to 1.0632. My intraday prediction doesn’t account for potential volatility brought about by the holiday. We could see some sharp short-term price fluctuations.
Positives for the euro (+):
Fundamental:
(+) US president Donald Trump favours a weaker dollar;
(+) Bundesbank president, Jens Weidmann, has stressed that the ECB needs to bring an end to its QE program earlier than planned;
(+) ECB bosses have discussed the possibility of raising interest rates before the QE program comes to an end;
(+) 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. From April to December 2017, the ECB will reduce their monthly assets purchases from 80 to 60 billion EUR;
(+) On the 24th of March, Donald Trump withdrew his proposed healthcare bill to replace Obamacare from the US Congress’ agenda;
Technical (short-term):
(+) Small speculators have increased their long positions by 1,181 to 65,366 contracts. Short positions have been reduced by 3,261 to 59,842 contracts. Net-long positions have grown from 1,082 to 5,524 contracts;
(+) US 10-year bond yields: 2.232% (down 0.62% from 12/04/17);
(+) EURGBP (W): CCI (20) – up;
(+) EURUSD (M): Stochastic (5,3,3), AO, AC, CCI (20) – up;
(+) EURUSD (W): AO, AC – up;
(+) EURUSD (D): AC, Stochastic (5,3,3), CCI (20) – up;
Negatives for the euro (-):
Fundamental:
(-) Head of the ECB – revision of monetary policy not required for the moment;
(-) According to CME Group’s FedWatch Tool, on Wednesday the 12th of April, the probability of a rate hike in May has risen from 4.3% to 5.3% and in June from 61.7% to 62.1%. The probability of a rate hike in July has fallen from 65.6% to 65.0%;
(-) Political risks in Europe (French elections);
Technical factors (short-term):
(-) According to data from 04/04/17, large speculators on the Chicago exchange have reduced their long and short positions. long positions have fallen by 4,506 to 155,947 contracts, while short positions have fallen by 1,314 to 166,294 contracts. Net-short positions have grown from 7,155 to 10,347 contracts;
(-) Short/long ratio according to myfxbook as of 7:30 EET: 28%/71%, lots: 8532/21629 (previous day: 14854/20953), positions: 28298/48830 (previous day: 42571/46347);
(-) German 10-year bond yields: 0.178% (down 11.44% from 13/04/17);
(-) EURGBP (M): AC, AO, CCI (20), Stochastic (5,3,3) – down;
(-) EURGBP (W): Stochastic (5,3,3), AO, AC – down;
(-) EURGBP (D): Stochastic (5,3,3), AO, AC, CCI (20) – down;
(-) EURUSD (W): Stochastic (5,3,3) – down;
(-) EURUSD (D): AO – down;
Built into the price:
(-) The Ex-Prime Minister of France, Alain Juppe, has ruled himself out of participating in the presidential election;
(-) Fed member Evans is expecting 2-3 rate hikes in 2017. The Federal Reserve will make a decision about the next hike in June;
(-) President of the Philadelphia Fed, Harker, announced that the Federal Reserve will continue to gradually increase interest rates throughout 2017;
(-) Eric Rosengren, president of the Boston Fed, argues that the central bank should raise interest rates every other session, meaning that he expects to see another 3 hikes this year;
(-) FOMC member Williams is envisaging another 2-3 rate hikes this year and isn’t ruling out the possibility of even more. The Fed could also start reducing its balance sheet this year, which is earlier than many economists had predicted;
(-) Dallas Fed president Kaplan has said 3 rate hikes in 2017 is his base case;
(-) FOMC member Mester says that the Fed needs to reduce the size of its balance sheet this year;
(-) St. Louis Fed president Bullard has said that the Federal Reserve needs to act quickly on normalising its balance sheet;
(+) 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;
(+) 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;
(+) The Greek government has made some progress in its talks with international creditors on the second stage of their reform program;
(+) Ewald Nowotny, a member of the ECB’s governing council, has said that the bank could raise the deposit rate before the main refinancing rate;
(+) ECB member Lautenschläger warns that it’s time to prepare for a change in the bank’s policy.