The euro/dollar on Thursday formed a spike. The strengthening of the euro to 1.0942 was caused by Reuters and a fall in European stock indices. Reuters relayed that the majority of ECB representatives are against a further loosening of monetary policy and at that moment the stock indices were trading down by 2-3%.
In the second half of the day the euro weakened against the dollar due to a rise in oil prices, a rise in US stock indices and a fall in the euro/pound cross after the BoE convened.
Brent was up to $31.16 per barrel. The Bank of England kept its interest rate at 0.5% and its asset purchasing program at 375 billion GBP. The indices were up by about 1.5%.
The number of initial unemployment benefit applications in the US for the week was up from 277k to 284k.
Main news of the day (EET):
Trader attention on Friday will be on stock indices’ movements, in addition to US fundamental data. The Japanese Nikkei 225 and the Shanghai Composite are trading in the red zone. Oil is down slightly.
If the European indices head down following Asia, the euro will strengthen against the dollar to 1.0909. In my forecast I’ve gone for a sideways until US trading and then a growth of the euro. Monday is Martin Luther King Day in the US, so the stock indices will be able to take a break and this will give the euro room to rise.
The euro/dollar has corrected by 45 degrees (Gann levels) from a minimum of 1.0834. I expect it to close up today. The reason for the euro’s strengthening is written above. It would be decent if the pair can stick out the American session near the balance line (55 average). I expect to see a rise from here to about 1.0915/30.
On Thursday the euro/pound cross rose to 0.7606. After the Bank of England convened it dropped to the LB. When the price is near the balance line, it means it is ready to deviate from it by 0.6 or 1%. Since I expect to see a fall of the US stock indices today before the extended weekend, my scenario for the euro/pound and the euro/dollar are looking up.
Due to yesterday’s spike-formed price pattern, the situation is ambiguous once again.
A flat is visible on the weekly for six straight weeks. We need to wait for the weekly candle to close.
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Forecasts which are made in the review constitute the personal view of the author. Commentaries made do not constitute trade recommendations or guidance for working on financial markets. Alpari bears no responsibility whatsoever for any possible losses (or other forms of damage), whether direct or indirect, which may occur in case of using material published in the review.
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