Eur/usd - page 478
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Yesterday the EURUSD plunged with a wide range and closed near the low of the day, in addition managed to close below the previous day range, which suggests a strong bearish momentum.
The pair is trading below the 10 and the 200-day moving averages that are acting as a dynamic resistance and is trading above the 50-day moving average that is acting as dynamic support.
The key levels to watch are: a daily resistance at 1.1237, the 10-day moving average at 1.1253 (resistance), the 200-day moving average at 1.1192 (resistance), the 50-day moving average at 1.1134 (support) and a daily support at 1.1097.
After starting the week with moderate growth, the euro erased gains during yesterday's session. The single currency was trading at 1.1142 at the end of a session and dropped with 46 pips, as the intraday low was reached at 1.1131. Technically the sentiment remains negative, but it’s not excluded a test of the psychological level at 1.1105. Support is located at 1.1105 and resistance is seen at 1.1235.
EUR/USD: Dollar At Daily Highs After Solid ADP Report
Traders bought the US dollar on Wednesday and the EUR/USD pair was trading at daily lows during the US session, hovering around $1.1130 and losing 0.10% on the day.
The August ADP employment report showed that the United States created 177,000 jobs, down from upwardly revised 194,000 in July. The greenback ticked higher after this number.
Later in the day, the Chicago PMI for August is due and should ease to 54.1 from 55.8 booked in July. Moreover, pending home sales for July will also be published.
From the euro perspective, the unemployment rate stayed at 10.1% in July, although analysts had expected an improvement to 10.0%. Moreover, the euro zone's CPI stayed at 0.2% year-on-year in August. Inflation remains dismal and the euro should stay muted as the European Central Bank might loose monetary policy further in the near future.
"It looks to be a very tight call as to whether or not the ECB acts on 8 September or decides to maintain a “wait and see” stance as to how the Eurozone economy is performing – we marginally lean towards the “wait and see” view. Our suspicion that the ECB is most likely to sit tight is fueled by Governing Council member Villeroy de Galhau stating on Wednesday that the ECB should stick with its current monetary stance," Howard Archer, chief UK + European economist at IHS Global Insight said on Wednesday.
In addition, German retail sales for July improved from -0.6% to 1.7% month-on-month, while the yearly change crashed to -1.5% from 2.3% booked in the month of June.
Finally, French CPI failed to meet expectations and rose from -0.4% to 0.3% on a monthly basis. The year-on-year change stayed at 0.2%.
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During the early trading hours EUR/USD was hovering around 1.1130 level, but later on the solid ADP employment report pushed the pair higher to currently trade at 1.1163.
Yesterday the EURUSD initially fell but found enough support at the 50-day moving average to trim all its losses and closed near the high of the day, although managed to close within the previous day range, which suggests being slightly on the bullish side of neutral.
The pair is trading below the 10 and the 200-day moving averages that are acting as a dynamic resistance and is trading above the 50-day moving average that is acting as dynamic support.
The key levels to watch are: a daily resistance at 1.1237, the 10-day moving average at 1.1236 (resistance), the 200-day moving average at 1.1170 (resistance), the 50-day moving average at 1.1135 (support) and a daily support at 1.1097.The single currency recovered some of the losses during yesterday's session, adding 15 pips to 1.1157 after trading within the extreme values of 1.1165 and 1.1122. For the week, however, the EUR/USD pair remains at a loss, marking third consecutive month of wavering. In August, the euro fell less than 0.2 %. Meanwhile, the outlook remains negative. The price could not overcome the psychological support level at 1.1100.
ISM manufacturing report surprised with poor numbers and pushed the single currency to highest level for the last three days and marked an intraday high at $1.12.
Brushing aside concerns with the region’s banking sector and Brexit, the EUR has performed reasonably well over the past month. Indeed, the common currency has capitalized on the recent bout of USD malaise while also continuing to benefit from its current account surplus. Additionally, the flash estimate of Q2 growth saw the Eurozone economy expand by 1.6% year/year—not an impressive number by historical standards but still good enough to eclipse the underwhelming 1.2% for the US. Still, all is not well in the Eurozone. The growth number masks an underperforming Italian economy that remains suspect ahead of an important constitutional referendum in November. The referendum itself has turned into a de facto vote of confidence in current PM Matteo Renzi and could open the way for the euroskeptic ‘Five Star’ party to gain prominence.
On the monetary policy front, the ECB is facing a shrinking supply of assets to buy as part of its QE program, especially of German Bunds of which the Bank cannot buy anything with a yield less than -0.40% (Chart 3). As a result, the Bank may need to alter the composition of its program to preserve its EUR80 bn monthly target. On top of all of this, the cloud of Brexit negotiations still looms large into autumn. The effects of QE modifications will likely be more apparent in yields than in the EUR.
However, when taken with a market that is still too complacent on the Fed, the influence of EU/US spreads should continue to weigh on the EUR. That will see the recent divergence between spreads and EURUSD correct as the common currency weakens in the months to come, though the current account surplus should mitigate some of the pain.
CIBC targets EUR/USD at 1.08 by the end of the year.