Press review - page 242
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The EUR/USD pair initially tried to rally during the course of the week, but found enough trouble at the 1.28 level in order to turn things back around and fall very harshly. We tested the 1.25 level, but found it to be somewhat supportive towards the end of the session on Friday. Ultimately, if we break down below the lows of the week, we could go much lower at that point in time. We believe that the market should continue to go lower given enough time, and that the 1.25 level will eventually break down.
Ultimately, we believe that the market could very well head back down to the 1.2050 level, as it would then be a “round-trip” of the entire uptrend that we have obviously broken down below now. The fact that the 1.28 level, which of course was the 61.8% Fibonacci retracement level of the longer move, was broken down significantly, it appears that the market should make that round-trip previously mentioned.
Ultimately, we believe that anytime that this market will continue to be sold off every time it rallies, as the sellers are most certainly in control at this point time. And we think about it, it makes him presents as the European Central Bank almost certainly has to keep a very loose monetary policy in order to bring down the value of the Euro in order to try to stimulate the economy.
Given enough time, we believe that the real way to make profits over the longer term will be to continue to hang onto trades, perhaps adding to a position in order to increase its size every time we rally. The 1.20 level below should be rather supportive though, so we don’t know whether or not the market will actually go below there. At that point in time, it is possible that the trend will turned back to the upside, but assuredly at this point in time it appears of the market is ready to break down significantly. We have no interest in buying this market until we break above the 1.30 handle, something that does not look very likely.
The GBP/USD pair initially tried to rally during the course of the week, but then turned back around to slam into the 1.60 handle. With that being said though, it looks as if we have plenty of support in this area, so we believe that the market will continue to bounce around in this general vicinity. If we get a break above the 1.62 level, we feel that this market should continue to go much higher, perhaps heading as high as 1.72 given enough time. We have no interest in selling until we get below the 1.5850 handle.
EUR/USD Technical Analysis: Half of Profit Booked on Short (based on dailyfx article)
The Euro continues to press downward against the US Dollar, with prices probing the lowest levels in over two years. Near-term support is in the 1.2500-34 area, marked by the October 3 low and the 23.6% Fibonacci expansion, with a daily close below that exposing the 38.2% level at 1.2316. Alternatively, a reversal above trend line resistance at 1.2737 opens the door for a test of the October 15 high at 1.2886.
EUR/USD: Likely to stick around 1.2500 until the ECB on Thursday
Thanks to some of our institutional friends yesterday in the FXWW chatroom, we discovered that there are some very large expiries in EUR/USD at 1.2500 over the next few days. This will most likely keep the pair stuck within 50/70 pips either side until the ECB statement on Thursday.
The speculative market is very short of EUR and very bearish, but if the ECB comes out with a dovish statement then we will probably see big Sovereign reserve managers start to sell EUR in size. This is the stand-off we are having at the moment. If the ECB is neutral, then the speccy shorts will start covering aggressively.
So EUR/USD sideways until Thursday and then sharp movements one way or the other.
EUR/USD Technical Analysis: Euro Aiming Below 1.24 Figure (based on dailyfx article)
The Euro sank to the lowest level in over two years against the US Dollar, with sellers claiming a foothold below the 1.25 figure. A daily close below the 38.2% Fibonacci expansion at 1.2316 exposes the 50% level at 1.2140. Alternatively, a turn above the 1.2500-34 area (October 3 low, 23.6% Fib) clears the way for a challenge of trend line resistance at 1.2723.
We entered short EURUSD at 1.2710 in line with our long-term fundamental outlook subsequently booked profit on half of the position. The rest of the trade remains open to capture any further downside momentum with a stop-loss at breakeven (1.2710).
EURUSD Scalps Target 1.26 Ahead of ECB / NFPs (based on dailyfx article)
if actual > forecast (or actual data) = good for currency (for GBP in our case)
[GBP - Services PMI] = Level of a diffusion index based on surveyed purchasing managers in the services industry. It's a leading indicator of economic health - businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy.
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"UK service sector growth was sustained during October, but at the slowest rate in 17 months amid reports of some market uncertainty creeping into client decision-making. Although new work also continued to rise sharply, it did so at the slowest rate for five months. Business confidence weakened slightly as a result to a level below its historical average, while average charges were reduced fractionally for the first time in 17 months.Nonetheless, companies recruited additional staff to the greatest degree in three months as capacity remained under some pressure, which was highlighted by a further increase in work outstanding.
The seasonally adjusted Business Activity Index posted 56.2 in October, down from 58.7 in September. Latest data marked the second successive monthly fall in the headline index, and October’s reading was the lowest recorded for 17 months, although the implied rate of growth remained above the average for over 18 years of data collection."
EUR/USD Revisits Recent Lows After Hammer Formation Falls Flat (based on dailyfx article)
EUR/USD has slipped back below the 1.2500 handle after a bullish signal from a Hammer formation failed to find follow-through. As noted in recent reports the scope for the pair’s advance was likely limited given the nearby 1.2620 barrier overhead. With reversal signals now lacking a break below the recent lows near 1.2430 may set the scene for a descent on the late August ’12 lows near 1.2250.
EUR/USD: Hammer Candlestick Falls Flat
Trading the News: European Central Bank (ECB) Interest Rate Decision (adapted from dailyfx article)
The EUR/USD may face another selloff in the days ahead should the European Central Bank (ECB) adopt a more dovish tone and offer additional monetary support to prop up the ailing economy.
What’s Expected:
Why Is This Event Important:
The ECB may take a more aggressive approach in expanding its balance-sheet amid the growing threat for deflation, but we may see a relief rally in the EUR/USD should the Governing Council merely make an attempt to buy more time.
Nevertheless, ECB President Mario Draghi may promote a wait-and-see approach as the central bank continues to assess the impact of the non-standard measures, and the Euro may face a more meaningful rebound in the days ahead if we see more of the same from the Governing Council’s October 2 meeting.
How To Trade This Event Risk
Bearish EUR Trade: Governing Council Shows Greater Willingness to Implement More Easing
- Need red, five-minute candle following the updated forward-guidance to consider a short EUR/USD trade
- If market reaction favors a short Euro trade, sell EUR/USD with two separate position
- Set stop at the near-by swing high/reasonable distance from cost; at least 1:1 risk-to-reward
- Move stop to entry on remaining position once initial target is met, set reasonable limit
Bullish EUR Trade: ECB Attempts to Buy More Time- Need green, five-minute candle to favor a long EUR/USD trade
- Implement same strategy as the bearish euro trade, just in the opposite direction
Potential Price Targets For The ReleaseEUR/USD Daily Chart
- Despite the range-bound price action in EUR/USD, the
long-term outlook remains bearish as the RSI retains the downward
momentum carried over from the previous year.
- Interim Resistance: 1.2580 (78.6% retracement) to 1.2620 (50.0% expansion)
- Interim Support: 1.2450 (78.6% retracement) to 1.2470 (78.6% expansion)
Impact that the ECB rate decision has had on EUR/USD during the last meeting(1 Hour post event )
(End of Day post event)
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