EUR/USD: Monday against Friday

Previous:

On Friday the 12^th of May, trading on the Euro closed up. Before the US session, the pair was trading within a range of 1.0850 to 1.0880. After the release of US statistics, the Euro strengthened to 1.0934. Although the data was mixed, the overall effect on the dollar was negative. CPI and retail sales figures came out worse than expected.

US statistics:

• Preliminary data from the University of Michigan consumer sentiment index for May came out at 97.7 (forecast: 97.0, previous reading: 97.0).
• Retail sales grew in April by 0.4% (forecast: 0.6%, previous reading: 0.1%).
• Non-auto retail sales rose by 0.3% in April (forecast: 0.3%, previous reading: 0.3%).
• The CPI in the US for April was 0.2% MoM and 2.2% YoY (forecast: 0.2% MoM, 2.3% YoY, previous reading: -0.3% MoM, 2.4% YoY).

Market expectations:

Given that the Euro/dollar pair closed up on Friday, today I’m expecting it to slide to 1.0893. The Stochastic oscillator is in neutral territory at around 41%. Due to this, I’m expecting to see Friday’s rally being corrected downwards from around 1.0942 level. The economic calendar is empty today. Volatility could be increased this evening by British Prime Minister Theresa May, who is scheduled to speak.

Day’s news (GMT+3):

• 10:15 Switzerland: producer and import prices (Apr);
• 15:30 USA: NY Empire State manufacturing index (May);
• 17:00 USA: NAHB housing market index (May);
• 22:00 UK: statement from Prime Minister Theresa May;
• 23:00 USA: net long-term TIC flows (Mar).

EURUSD rate on the hourly. Source: TradingView.

Intraday forecast: low: 1.0893, high: 1.0942, close: 1.0902.

The news on Friday took the EUR/USD pair up to 1.0934. This growth stopped between the 67^th and 90^thdegrees. Today is Monday, and so my forecast for today goes against Friday’s rally. I’m expecting the rate to start falling from the 90^th degree. I haven’t factored in any potential developments in the news . I’m expecting the rate to return to the balance line at around 1.0893/900.

It’s worth keeping an eye on the price’s behaviour at around 1.0909 (22 degrees). A sharp bounce from here would be dangerous for buyers given that this could trigger a weakening of the dollar across the market, returning the price to 1.0935.

Positives for the Euro (+):

Fundamental:

(+) US president Donald Trump favours a weaker dollar;

Technical (short-term):

(+) According to data from 09/05/17,  large speculators on the Chicago exchange have reduced short and long positions. Short positions have been reduced more than long ones by a factor of 12. Long positions have fallen by 2,899 to 152,481 contracts, while short positions have fallen by 34,758 to 127,553 contracts. The closing of short positions has resulted in an increased number of long positions. Net-long positions are now at 24,928 contracts;

(+) Small speculators have increased their long positions by 7,335 to 70,321 contracts. Short positions have fallen by 3,924 to 59,663 contracts. Long positions have again increased. Net-long positions currently stand at 10,658 contracts;

(+) According to myfxbook, the Short/Long ratio as of 6:39 EET is 78%/21%, lots: 22218/6194 (previous day: 12416/10419), positions: 57830/19985 (previous day: 37879/29015);

(+) US 10Y bond yields: 2.326% (down 2.55% from 12/05/17);

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

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

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

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

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

Negatives for the Euro (-):

Fundamental:

(-) ECB head: revision of ECB’s monetary policy not required at present. On the 10^th of May, he added that the bank is in no hurry to raise interest rates or to halt its asset purchasing program;

(-) On Friday, the 12^th of May, according to CME Group’s FedWatch, the probability of a rate hike in June has fallen from 83.1% to 73.8%, in July from 84.4% to 76.4% and in September from 90.4% 82.9%;

Technical (short-term):

(-) German 10Y bond yields: 0.392% (down 9.04% from 12/05/17);

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

(-) EURGBP (W): AO – down;

(-) EURGBP (D): AC – down;

(-) EURUSD (W): CCI (20) – down;

(-) EURUSD (D): AC, AO – down;

Built into the price:

(-) Tension surrounding the situation with North Korea. Increased demand for safe haven assets;

(-) The US Congress has approved a temporary budget, avoiding a government shutdown for the time being. A week’s delay will give time for knocking out a draft budget for the rest of the fiscal year (end of September). It became clear on the 1^st of May that Republicans and Democrats had settled on a compromise to keep the budget going until the 30^th of September;

(+) Emmanuel Macron has been sworn in as the new president of France;

(+) S&P has reaffirmed Germany’s credit rating at AAA/A-1+ with a stable outlook.