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Euro/Dollar: After Draghi, Trader Attention has Switched to NFP

Hourly

Yesterday’s Trading:

The ECB meeting on Thursday saw no change to the Eurozone base rate. The refinancing rate was left at 0.05%. There wasn’t a reaction to their decision since it wasn’t unexpected. Trader then switched to Draghi’s press conference.

Draghi updated us on the ECB’s quantitative easing program and also put down GDP and inflation forecasts for the Eurozone. Due to a slowing in economic growth in the developing markets and a fall in the price of oil, the GDP forecast for this year was reduced from 1.5% to 1.4%, for next year it was reduced to 1.7% and 2017’s forecast was revised downwards to 1.8%. These forecasts relate to an estimated inflation level of which has now been reduced from 0.3% to 0.1%.

The monthly 60 billion euro state bond purchasing program will continue until at least September of next year. The regulator has extended the purchasing limit of assets from 25% to 33%.

The eurobulls didn’t take too kindly to this. After his speech, the euro/dollar fell by 140 points to 1.1086. The euro was later finished off by the US service sector business activity index which came out better than expected; but still down MOM. The US ISM for the service sector fell from 60.3 to 59.0

Main news of the day:

  • At 11:00 EET, the Eurozone will release Q2 GDP data;
  • At 15:30 EET, the US will publish unemployment data, information on changes in employment in the non-agricultural sector and the average hourly wage for August. Simultaneously, Canada will be totting up and letting us know its unemployment level and employment creation numbers from August;
  • At 16:00 EET, Canada will release Ivey’s manager’s business activity index for August.

Market Expectations:

Today’s trader attention will be focused on the publication of Eurozone, US and Canadian economic data. Q2 GDP data for the Eurozone, a labor market review for the US and a labor market report with Ivey’s PMI all due.

Technical Analysis:

  • Intraday target: maximum: n/a, minimum: n/a, close: n/a;
  • Intraday volatility for last 10 weeks: 130 points (4 figures).

The current rate is 1.1135. The forecast is for until 15:30. I’ve not made a forecast for the payrolls, but I’ll make a detailed report about it later on. I can say at least one thing: a weak report will send the euro to 1.1240, whilst a strong one will see the euro at 1.10.

Daily

After Draghi’s speech, the euro/dollar fell to 1.1086. The trend line has been broken. The new target is 1.10. A pinbar has been activated on the weekly. Now to the Weekly.

Weekly

The trend line was broken whilst Draghi was speaking. A fall of the rate below 1.1155 activated the pinbar. The road to 1.0950/30 is open for the eurobulls. Although the target is around 1.0700 according to the pinbar, I’ve stopped at 1.10/1.0950. The euro’s fate today is in the hands of the NFP. If it’s weak, next week will see all the media talking about a hike in US rates in September and euro/dollar parity.

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