During the past week EUR/USD was rather stable. The lowest level it fell to was $1.3575, while the most of the trading took place above $1.3590. On the upside the pair was capped by $1.3650.
So, we are seeing a kind of consolidation between the convergent lines of a triangle as euro formed a lower high and the higher low. A break outside this range will shape the next move of the pair.
Daily technicals are in favor of a bearish scenario: bearish engulfing was formed on Thursday; 55-day MA went below the 100-day one and the Ichimoku Cloud at $1.3668 provides resistance. On the weekly chart there’s still a long-term bullish trend, although Ichimoku shows some slight negative developments. As a result, the 55-week MA in the $1.3560, which was a good support since the beginning of the summer, may be tested. Next week the focus should be on $1.3550 and probably $1.3500.
In general, in Europe we have weaker data, some financial concerns and the ECB’s reassurance of more easing, while in America the market has learned that the Fed is in no hurry to lift up the interest rates. Still there’s much higher possibility of good economic data coming out of the US than from Europe as we are moving away from the disappointing first quarter and America’s economy is recovering.
There will be a lot of news next week. Pay special attention to what Draghi and Yellen say. Such abundance of news can make euro stuck in the $1.3670/1.3570 range. So far the bears had to fight for every inch down and this situation is unlikely to change as buyers on the dips are still out there. Support for euro may stem from the fact that the ECB is more talking about the big stimulus than making the actual steps.
All in all, the pair stayed in the $0.9340/9450 range. Although the level of $0.9500 was touched, the bears don’t want to let the bulls come so high up. On Thursday Australian dollar formed a bearish candle with a long upper shadow – Australian employment data were mostly negative with the unemployment rate increased to the highest level since July 2003, while trade surplus of China – Australia’s main trading partner – was lower than expected.
There’s not much to say about the technical picture. The pair’s consolidating awaiting drivers. Support is at $0.9340, $0.9265 and $0.9200, while resistance is at $0.9440, $0.9470 and $0.9500.
From the fundamental point of view, there are AUD-negative factors like that fact that it’s already very expensive and potential dovishness of the Reserve Bank of Australia; and AUD/-positive factors, primarily higher Australian yields in comparison to the US yields. All this makes us look from neutral to bearish on the pair. Note that since the strong US NFP data failed to make US Treasury yields and USD surge, the situation probably won’t change significantly this week. That’s the reason to be more neutral on AUD/USD.
Next week pay attention to the RBA meeting minutes due on Tuesday and a bunch of Chinese data on Friday. During the whole week there will be a lot of important data releases in the US.