Market Analysis: 9 March, 2017
by Christala Parmaxi, CFTe
As we mentioned earlier, the US Dollar extended its gains against the majors due to the surprisingly good figure of the private jobs added in the US; ADP Nonfarm Employment Change revealed that 298K new jobs were added in February. The US Dollar keeps on rising the most against the commodity currencies at around 0.86% against the Australian Dollar, 0.61% against the New Zealand Dollar and 0.55% against the Canadian Dollar; we always keep in mind that trade-based economies ideally prefer a weak exchange rate. Today’s most interesting pair of the G7 will be EURUSD since the European Central Bank will have its monetary policy meeting with the rate decision at 12:45 GMT and the Press Conference at 13:30 GMT.
The European Central Bank is widely expected to keep its Deposit Facility rate at -0.4% and its interest rate at 0%. The bond buying program is about to last for 9 more months and President Mario Draghi was not willing to discuss any modifications during the previous policy meeting. Since the previous policy meeting in January, the economic data releases were mixed with most of them being positive for the European Economy.
The European unemployment rate slightly improved in January, from 9.8% to 9.6%; January’s European annual Consumer Price Index surged at 1.8% from 1.1% while February’s Core CPI remained steady at 0.9%. Producers Price Index was also improved at 56 units for February indicating an upwards sloping curve in the business activity figures. The negative indicators were the Consumers’ Confidence Index which revealed that Europeans were less confident in February than in January and IFO, ZEW German Expectations.
Consequently, the European economy has slightly improved within those 2 months but Europeans do not feel the improvement and thus are not willing to expand their financial moves. Nevertheless, ECB seems willing to keep its exchange rate at low levels so that it continues to support the improvements in the economy and extend consumers’ confidence. Mario Draghi could be less dovish than the previous meeting since the economy is slightly improving, but in our view his purpose won’t be to appreciate the Euro since the global and domestic risks are still in place.
It is Euro’s big day and we couldn’t miss the technical view of the most traded Euro pairs.
The world’s most traded currency found support slightly above 1.052 and it is about to test the triple SMAs, which had a weird cross at the level of 1.0565. SMA50 had a bearish cross with SMA100 and SMA200 while SMA100 had a bullish cross with SMA200. In technical language, this would mean that based on the SMAs the short-term view is bearish while the longer one is bullish. The valid support levels are near 1.052 and 1.049 while the resistance levels are close to 1.057, 1.06 and 1.064.
Despite Euro’s weakness the last days, EURGBP surged up to 0.868 rising for 5 trading days in the row. The depreciation of the Pound is stronger than Euro’s and Euro bulls took advantage of it. MACD has slightly risen above its equilibrium line and its signal, indicating bullish signals while RSI is slopping upwards approaching its overbought level. The price on the daily chart is walking on Bollinger’s upper band which is another bullish signal. The valid resistance levels are near the psychological level of 0.87 cents while the next one is 0.873 and 0.879. The valid support levels are near 0.865, 0.86 and 0.855. From a technical perspective, the pair has more room to the upside while from a fundamental perspective the ECB is happy to keep its exchange rate at low levels, which both make sense for the pair to rise further. However, we need to be careful for volatility during today’s ECB meeting, which later may drive the pair to good entry point levels.
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