Trading yesterday:
The euro managed to sit at 1.0850 throughout the first half of Wednesday. After the February ADP data came out better than expected, the euro came under another wave of sales. Employment in the US private sector rose by 214,000 compared with a forecasted 190,000 and 193,000 in January. The report offered short term support to the dollar.
The driver weakening the euro was the euro/pound, which fell by 120 points to 0.7690. The GBP/USD managed to avoid a fall and reach a maximum for the week due to the euro falling. The euro/pound fell by 120 points and the pound dollar rose by 170 points to 1.4092.
Main news of the day (EET):
- 11:30, February business activeness indices in the service sector for the UK;
- 12:00, Eurozone January retail sales changes;
- 15:30, US initial unemployment benefit applications;
- 16:45, US Markit service sector activity index for February;
- 17:00, US ISM business activity index in service sector and data on manufacturing orders for January.
Market expectations:
The bearish set up on the euro continues, but I believe that we could see a strengthening of the euro against the dollar on Thursday as part of a correctional movement, following the pound/dollar and Australian/American dollar pairs. Trader attention will be on the publication of data regarding business activity in the service sector in different parts of Europe and the US.
Technical analysis:
- Intraday target maximum: 1.0930, minimum: 1.0845, close: 1.0900;
- Intraday volatility for last 10 weeks: 103 points (4 figures).
This morning the euro was trading at around 1.0845. The price is at the balance line. This means that the market is balanced on the hourly and that the price is readying to stray from the LB by 0.6% or 1%.
The pound/dollar has risen by 270 points over the past three days and the euro has fallen by 60 points in this time. The time has come to reduce the gap between the pairs. As soon as the euro/pound starts to correct, the euro will quickly win back its losses due to the general weakening of the dollar. We will see it reach at least 1.0960.
EUR/GBP 1H
Yesterday I expected to see a rise in the cross to 0.7820. The euro strengthened against the pound to 0.7812 due to a weak UK construction sector PMI. In the second half of the day the sellers broke the support zone and brought the rate to 0.7690.
The trend line on the hourly runs through 0.7760. After a four-day fall, I expect an upward correction to the trend line. I am not looking at the news since the pound has been strengthening against the dollar (by 270 points) with weak UK stats. I believe that the euro could move by at least one figure without any news.
Daily
On Wednesday the euro/dollar shifted the weekly maximum to 1.0825. Two daily candles with long shades have formed. They are not so large, but indicate a slowing of the euro weakening. The stochastic has formed a euro buy signal. The CCI indicator is readying to cross the -100 line. I am sure that many traders have set Buy Stops on the euro at the maximum. I expect a rebound to 1.0960.
Weekly