Preview:

On Thursday, the EUR/USD closed down. The pair is still in a sideways trend, trading within a 50 pip range from 1.0630 to 1.0680. Movement is limited but very impulsive. Market volatility increases while statements from central bank representatives are being made.

On Thursday, Mario Draghi said in a statement that there is currently no need for a revision of the ECB’s monetary policy. In this, he expressed the bank’s readiness to continue with their quantitative easing program. Sellers tried to use Draghi’s speech to bring the price down below 1.0630 but were met with a large volume of buy orders. By the time markets had opened in the US, the price had restored to 1.0676. By the day’s close, the Euro had lost all its gains.

Market expectations

Since trading has got underway in Asia, the rate has risen to 1.0660 as the US dollar is falling across the board following a military attack by the US on Syria. Pentagon chief, James Mattis, reportedly presented president Trump with incontrovertible evidence of Bashar al Assad’s guilt in using chemical weapons, collected from social media. Let’s wait and see how other countries will react to the USA’s actions.

Trader attention today is going to be focused on the US jobs report for March as well as any news from the meeting between the USA’s and China’s presidents.

The market is likely to remain volatile throughout the day. We’re expecting the Euro exchange rate to leave the 1.0630 – 1.0680 range.

Day’s news (GMT+3):

• 09:00 Germany: industrial production (Feb), trade balance s.a. (Feb);
• 10:00 Switzerland: foreign currency reserves (Feb);
• 10:30 UK: Halifax house prices (Mar);
• 11:30 UK: manufacturing production (Feb), non-EU trade balance (Feb), industrial production (Feb), construction spending (Feb);
• 12:00 UK: BoE governor Carney’s speech;
• 15:00 UK: NIESR GDP estimate (3M) (Mar);
• 15:30 Canada: net change in employment (Mar), unemployment rate (Mar);
• 15:30 USA: average hourly earnings (Mar), non-farm payrolls (Mar), unemployment rate (Mar);
• 17:00 Canada: Ivey PMI (Mar);
• 17:00 USA: wholesale inventories (Feb);
• 22:00 USA: consumer credit change (Feb).

EURUSD rate on the hourly. Source: TradingView.

Intraday forecast: low: n/a, high: n/a, close: n/a.

Over the last 4 trading days, a 50-pip wide corridor has formed. These are ideal conditions for range trading. The TC trend line is currently giving out a lot of false signals.

The trend line has yet to be broken. At the time of writing, the Euro is selling for 1.0648 USD. The price can be found in the lower half of the 1.0630 – 1.0680 channel. Today, traders will widen this range after the publication of NFP. Alternatively, the long-awaited exit from this range ay happen next week with the emergence of a new 200-300 pip impulse.

Positives for the euro (+):

Fundamental:

(+) 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 24^th of March, Donald Trump withdrew his proposed healthcare bill to replace Obamacare from the US Congress’ agenda;

Technical (short-term):

(+) According to data from 28/03/17, large speculators on the Chicago Exchange have increased their long and decreased their short positions. Long positions have grown by 1,807 to 160,453 contracts, while short positions have fallen by 9,283 to 167,608 contracts. Net short positions have fallen from 18,245 to 7,155 contracts;

(+) German 10-year bond yields: 0.256% (up 1.02% from 06/04/17);

(+) In Asia, US 10Y bond yields have fallen by 1.31% to 2.312%;

(+) EURGBP (W):  CCI (20), AO, AC – up;

(+)EURGBP (D): CCI (20), Stochastic (5,3,3), AC – up;

(+) EURUSD (M): Stochastic (5,3,3), AO, AC, CCI (20) – up;

(+) EURUSD (W): Stochastic (5,3,3), AO, AC, CCI (20) – up;

(+) EURUSD (D): Stochastic (5,3,3), AC – up;

Negatives for the euro (-):

Fundamental:

(-) Head of the ECB – revision of monetary policy not required for the moment;

(-) 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;

(-) According to CME Group’s FedWatch Tool, on Thursday the 6^th of April, the probability of a rate hike in May remains 5.3%. The probability in June has risen from 66.6% to 70.9% and in July from 69.1% to 73.8%;

(-) Political risks in Europe (French elections);

Technical factors (short-term):

(-) Small speculators on the Chicago exchange have reduced their long positions by 1,095 to 64,185 contracts and increased shorts by 10 to 63,103 contracts. Net long positions have fallen from 2,187 to 1,082 contracts;

(-) Short/long ratio according to myfxbook as of 8:02 EET: 22%/77%, lots: 9256/32004 (previous day: 10084/28169), positions: 35806/64580 (previous day: 39422/53484);

(-) US 10-year bond yields: 2.346% (up 0.51% from 06/04/17);

(-) EURGBP (M): AC, AO, CCI (20), Stochastic (5,3,3) – down;

(-) EURGBP (W): Stochastic (5,3,3), CCI (20) – down;

(-) EURGBP (D): AO – down;

(-) EURUSD (W): Stochastic (5,3,3) – down;

(-) EURUSD (D): AO, CCI (20) – 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;

(+) 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;

(+) 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;

(+) 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.