By Gabriel Ojimadu, Alpari
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On Monday the 11th of December, trading on the euro/dollar pair closed slightly down, leaving a wick with a high of 1.1812 before dropping to 1.1769. With a bare economic calendar, market activity at the beginning of this week has got off to a slow start. Traders based their decisions mostly on the dynamics of US bond yields. In Europe, US 10Y bond yields dropped to 2.354%, before recovering to 2.391% in the US session. Growth for bond yields means growth for the dollar.
Day’s news (GMT+3):
- 07:30 Japan: tertiary industry index (Nov).
- 09:30 France: nonfarm payrolls (Q4).
- 12:30 UK: CPI (Nov), retail price index (Nov), PPI input (Nov), PPI output (Nov).
- 13:00 Germany: ZEW survey – economic sentiment (Dec).
- 13:00 Eurozone: ZEW survey – economic sentiment (Dec).
- 16:30 USA: PPI (Nov).
- 22:00 USA: monthly budget statement (Nov).
- 22:00 Eurozone: ECB President Mario Draghi’s speech.
Fig 1. EURUSD hourly chart. Source: TradingView
Yesterday’s predictions didn’t come off. With the euro crosses rising and US 10Y bond yields dropping, the euro broke up the A-A channel. The euro’s rise against the dollar was stopped in its tracks by the 67thdegree. The EURUSD rate dropped to 1.1765.
The 45th degree has shifted from 1.1730 to 1.1758 as a result of the 1.1812 high being formed. I think the euro is going to move upwards from the 45th degree towards 1.1811. On the daily timeframe, two candlesticks with diverging tails have formed a range of 1.1730 to 1.1812. The euro will continue to move in whichever direction it breaks out of this range.
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Markets await the FOMC meeting and Janet Yellen’s press conference on the 13th of December. They’ve already factored in a 25-base-point increase to interest rates, so euro bulls shouldn’t waste their energy trying to push the price up here.
I’m thinking about opening a long position with a BuyStop at 1.1780. If the euro renews the 1.1764 low, then it may be worth risking a long position from 1.1758/60. These are preliminary values, they may need adjustment later.
