By Gabriel Ojimadu, Alpari
On Wednesday the 28th of February, trading on the euro closed down. Including during today’s Asian session, the single currency has dropped to 1.2184. As the dollar was rising across board, the euro’s drop could have been more intense. It was saved by the euro/pound cross, which posted a 1% gain to reach 0.8869.
The pound came under pressure after a draft proposal on Britain’s withdrawal from the EU was published. The document has revealed deep rifts between the two sides and shows how far they are from reaching a final agreement. This could lead to even tougher terms of exit.
Aside from the dollar’s gains on all fronts, the euro also came under pressure from reduced Eurozone inflation as well as the upcoming parliamentary elections in Italy, which will be held on Sunday.
US data:
- Pending home sales (Jan): -4.7% (forecast: +0.4%, previous reading revised from 0.5% to 0.0%).
- Chicago PMI (Feb): 61.9 (forecast: 64.2, previous: 56.7).
- GDP (Q4): +2.5% (forecast: +2.5%, prelim reading: +2.6%).
Day’s news (GMT+3):
- 09:45 Switzerland: GDP (Q4).
- 11:15 Switzerland: retail sales (Jan).
- 11:50 France: Markit manufacturing PMI (Feb).
- 11:55 Germany: Markit manufacturing PMI (Feb).
- 12:00 Eurozone: Markit manufacturing PMI (Feb).
- 12:30 UK: Markit manufacturing PMI (Feb), net lending to individuals (Jan), mortgage approvals (Jan), consumer credit (Jan).
- 13:00 Eurozone: unemployment rate (Jan).
- 16:30 Canada: current account (Q4), Markit manufacturing PMI (Feb).
- 16:30 USA: personal consumption expenditure – price index (Jan), personal income (Jan), personal spending (Jan), initial jobless claims (23 Feb).
- 17:45 USA: Markit manufacturing PMI (Feb).
- 18:00 ISM manufacturing PMI (Feb), construction spending (Jan), Fed’s Powell speech.
- 19:00 USA: Fed’s Dudley speech.
Fig 1. EURUSD hourly chart. Source: TradingView
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I correctly predicted that the euro would retreat to the 135th degree yesterday. It missed my target of 1.2181 by 3 pips. Today, I think the rate will drop significantly lower than this.
At the moment, the euro crosses are providing support to buyers in Asia. The EURGBP pair is on the verge of a drop. The downwards correction has brought it to 0.8823. I think it highly unlikely that buyers will manage to hold onto 0.8870. Also, considering that the dollar is trading up against the majors in Asia, a drop on the cross would push the EURUSD pair down to the 157th degree at 1.2154.
Today will be full of news, so price fluctuations could vary from my forecast. Jerome Powell’s speech is scheduled for 18:00 (GMT+3).
