EURUSD - Trends, Forecasts and Implications (Part 1) - page 910
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Fed/Bernarke/and Obama himself, talking about not very good things... Greece finally assured there will be no default, on a fundamental basis we should assume a pullback up...(dollar will weaken, euro should strengthen).If on a technical level... the pair hasn't reached its targets. I'm confused... and a correction is taking place at the moment)Published 09:35 01/02/2010
Hello!
The dollar ended the week with a solid strengthening. The EUR/USD closed near the low of 1.3860, the lowest since July 9, 2009. A series of positive economic data from the US contributed to the decline, following which market participants started to talk about the possibility of an interest rate hike in the US, ahead of the eurozone.
Zhu Min, the deputy governor of the People's Bank of China, made a panic warning at the Davos forum: if the Fed starts to tighten monetary policy, it will lead to a huge outflow of funds from emerging markets and a general collapse of monetary funds on the model of the 1997/98 Asian crisis and liquidity squeeze of 2008. In other words, the Chinese have made it clear that they want a weak dollar and a (also weak) yuan pegged to it - otherwise "they are not responsible for themselves.
President Obama has said he wants a tax on repo transactions; in his annual address he also promised a 3-year freeze on regular treasury spending, no tax breaks for oil companies and the rich, tax breaks for small business and the middle class, tough on those who move production outside the US, help households with mortgages, push for new financial regulations and healthcare reform. Obama also vows to double exports in 5 years, which is even more foolish than Putin's doubling of the GDP in 7 years; cutting the federal deficit by $1 trillion over 20 years, which would mean raising the federal debt from the current $12 trillion to at least $18 trillion. Even his own Treasury was taken by surprise by Obama's brilliant ideas, and his staff made comments along the lines of "here we are made to look like ignorant idiots, let him explain what he had to say".
Greece placed a 5-year bond, to the astonishment of the scolders, the issue attracted a huge demand, which caused the volume of the issue to reach 8 billion euro instead of the planned 3 billion. The yield was high (6.2% p.a.), but the surge in demand was caused by gossip about allegedly large Chinese demand - the Greeks and Chinese denied the rumour, after which investors dispersed. Greece needs to float bonds worth 50-55 billion euros in 2010.
The next target of critics in the Eurozone is Portugal, which presented a draft budget for the current year with a deficit of 8.3% of GDP (compared to 9.3% in 2009), and even this is only realistic in the case of renewed economic growth. At this rate, the national debt would exceed 85% of GDP by the end of the year, and rating agencies cut their prognosis for the country from neutral to negative. The Spanish deficit was downgraded to 10% of GDP - the agencies argued, but have not yet decided to take drastic measures.
On the FOREX, the Euro continued to fall, which was also caused by the aforementioned misfortunes for a number of Eurozone countries. The pound had the most fun, it was supported by the demand of British Petroleum, which had to buy a lot of sterling to pay its dividends.
Technically, EUR|USD has broken through the level of 1.4111 (38.2% of the increase from March to December) and is moving towards the target of 1.3785 (50%). If this support is broken down, the price will move to 1.3477, as analysts at several reputable banks are writing about.
The euro/dollar pair is trading near the level of 1.3850. A further decline is crucial because in that case the pair will be subject to a long downside risk, judging by the fact that it will be in a wide selling range (the benchmark is to the beginning of March). However, the April option contracts indicate an interest range of 1.35 to 1.50. A more detailed analysis suggests that the current decline will be confined to the 1.3850 - 1.35 range.
Have a good day.
FIBO Group MFH Analyst, Michael NersesovEURUSD forecast for 01.02.2010 by Box-Jenkins:
There is at least a correction coming, well due to the transitional momentum:
the situation is uncertain.
1 February. /Dow Jones/. The euro/dollar pair continued its strong overall downtrend and hit new 10-11 month lows after breaking below 1.3930, targeting 1.3801 and 1.3774. The 1.3801 level represents the retracement level of the 50% rise wave from 1.2457 to 1.5145. However, given the dominance of the downtrend from 1.5145, the pair is expected to reach target levels around 1.3644-1.3653 this week. The current rise from 1.3851 is likely to meet resistance at the lows of the former range at 1.3930, and only a break above Friday's lower high of 1.3988 would put the pair's negative prospects in doubt. The pair is now trading at 1.3885.
-Author Francis Bray, Dow Jones chief technical analyst for Europe; translation by PRIME-TASS; +7 495 974 7664; dowjonesteam @ prime-tass.com.
Dow Jones Newswires column by Francis Bray, MSc Technical Analyst /MSTA/
LONDON, Feb. 1. /Dow Jones/. Moving charts for 24 hours:
*The pivot point is calculated as the sum of the high, low and closing level divided by three.
EUR/USD during the day: The pair maintained a strong downside bias and dropped to new 6-7 month lows below 1.3930 and is threatening to continue falling and test 1.3801, the retracement level of the 50% retracement wave from 1.2457 to 1.5145. Below this level is the important higher low of 1.3748, reached in June 2009. On a corrective rise, the pair should encounter resistance at 1.3930, and only if it rises above the lower high of 1.3988 will the pair be able to take a breather.
EUR/USD on the weekly chart: It is in a downtrend.
US Dollar/Japanese Yen during the day: The pair continued to rise from the Jan 27 low of 89.14 as the downward momentum weakened and there is a risk of renewing upward pressure on Friday's high of 90.93. The 89.14 mark represents a retracement level on the 50% wave of strong gains from 84.82 to 93.78 and a break above 90.93 would open the way to a lower high of 91.88. A fall below 89.76 would call into question the upside scenario and the pair would again target the low of 89.14.
US Dollar/Japanese Yen pair on the weekly chart: Downtrend.
GBP/USD during the day: A break-down on Friday completed the formation of a bear-flag pattern and the situation became controlled by downside bettors. As a result, the higher low of 1.5896 reached on January 7 came under pressure. With further declines the pair will target the December 30 low of 1.5834, but expectations of new lows of 3-4 months with further declines towards 1.5708 dominate. In case of a corrective rise, the pair will meet resistance below 1.6080.
GBP/USD on the weekly chart: Downtrend.
USD/Swiss franc pair during the day: The upside bettors made a sustained break-up of 1.0509 to reach a new 4-5 month high and after the pair reached the 1.0621 target on Friday, there is a risk of further rally above 1.0644 towards the 1.0723 wave equality target. There is a risk of consolidation towards the intraday symmetrical triangle, but the fall looks set to be capped at 1.0525.
US dollar/Swiss franc pair on the weekly chart: Uptrend.
Euro/British Pound pair during the day: The pair continues to rise from the January 28 low of 0.8603 with the aim of testing key resistance at 0.8746. The weakening upside bias is indicated by the technical indicators on the daily chart. A breakout of 0.8746 will open the way for the pair to rise to a lower high of 0.8794. If the pair fails to break through 0.8746, it will fall towards 0.8662 and 0.8631.
Euro/British Pound pair on the weekly chart: Downtrend.
Euro/Japanese Yen during the day: The pair continued to decline in the prevailing downtrend and reached new 9-month lows below 125.23. There are clear signs of a fall towards the projected support area of 122.46-122.81. There is a risk of an intermediate upward correction to 124.45, but this rise will be capped at 126.25, protecting the lower high of 126.78.
Euro/Japanese Yen on the weekly chart: Downtrend.
Euro/Swiss franc pair on the day: Friday's drop to a new 10-11 month low at 1.4635 triggered an intervention which took the pair to 1.4770, but the dominant downtrend suggests the risk of a gradual decline to a low of 1.4635. A fall below 1.4696 would accelerate the decline and first target the pair at 1.4667, which protects the 1.4635 low. The rise is likely to be limited to the 1.4757 area.
Euro/Swiss franc pair on the weekly chart: Downtrend.
AUD/USD on the day: The pair maintained its dominant downtrend and made a break below 0.8913, which renewed the pressure on the target level of 0.8811. With further declines, the pair will target the reactive low of 0.8737 reached on December 23. If 0.8811 holds, that would indicate a symmetrical triangle pattern forming in the long term, and a break above 0.8913 and the lower high of 0.8960 would indicate in favour of this scenario.
Aussie/Dollar pair: Downtrend.