Previous:
After a break in the support at 1.1375 and the balance line (average line with a 55 period) on Thursday, the euro/dollar dropped to 1.1305 without a pit stop. The buyers were pushed into closing long positions by the yen crosses.
Later on, some information came out about how the euro will be sold because of the ECB purchasing corporate bonds. Traders focused on how the bank acquired bonds from Italy’s largest telephone company - Telecom Italia (MI:TLIT) SpA - on May 8th, and this company has two speculative rating levels from Moody’s and S&P.
The ECB noted, however, that these securities still have an investment level from Fitch. This runs in line with ECB requirements formally, but traders saw the inclusion of Telecom Italia SpA in the list of purchases as the regulator’s readiness to buy up bonds without investment levels if QE is to be expanded.
The dollar received support during the American session from data on unemployment benefit applications in the US. The number expectedly fell from 268k to 264k (forecasted (270k).
Market Expectations:
The euro/dollar fell 124 points to 1.1291. I reckon the euro will drop to 1.1281, after which I expect to see a revival of the quotes to 1.1345. Today is Friday; the news is lacking, so a correction on yesterday’s downward wave could be just about right. If the buyers pass 1.1281, the next support level will be 1.1255.
Day’s News (EET):
- 10:00, German central bank president Weidmann to speak;
- 11:30, UK May consumer inflation expectations;
- 15:30, Canadian unemployment level and job creation in May;
- 17:00, US preliminary consumer sentiment and inflation expectations in June from the university of Michigan;
- 21:00, US May federal budget balance.
Technical Analysis:
Intraday forecast: minimum: 1.1285, maximum: 1.1345, close: 1.1324.
The euro’s weakening on Thursday slowed at the 90th degree. The price in Asia is nearing 112 degrees. Without the news, 112-135 is an inversion level. The volumes reduce with a fall, so I’ve forecasted an upward correction for the euro from 1.1285 to 1.1345. By 17:00 EET, the LB will be at this level, thereby strengthening the resistance.
While the euro was strengthening, option traders bought the ball and chain. At the 1.12 strike we could see a sharp increase in volume. For the past few days there’s been a price range of 1.12-1.15 for volumes on July futures. Here the price could hold out for a few days.