The euro/dollar on Tuesday managed to get back its losses after falling to 1.1335 in response to strong USA ISM service sector data.
In March, the ISM index for business activity in the US service sector rose to 54.5 against 53.4 in February (forecasted: 53.6). Markit’s PMI rose from 51.1 to 51.3.
It’s worth mentioning that the speedy restoral of the price was facilitated by the strengthening of the euro against the British pound. The rate broke from the balance line and rose from 0.7979 to 0.8053.
According to my intraday forecast for Wednesday, I reckon we will see euro movements similar to that of Tuesday. If you’re asking me if the euro will head up: I’d say it could. The euro is receiving a strong support from the euro/pound cross. Euros are being bought for pounds since traders are worried that UK voters will vote for a Brexit in the upcoming referendum.
Another important factor for the euro is the rise in the price of oil after the API report and the strong Chinese service sector data from Caixin. Oil reserves are down. The Caixin showed a March value of 52.2 against a February 51.2. Rising oil prices are having a positive effect on the euro. If the euro/dollar strengthens above 1.1410, then I see only one way: a further strengthening to 1.1440. The key event of the day is the FOMC minutes.
Day’s News (EET):
17:00, Canadian PMI from Ivey for March;
17:30, US oil reserve report from the Ministry for Energy;
21:00, FOMC minutes.
The euro/pound is trading near the trend line on the monthly time frame. On the hourly the support in the cross runs through 0.8016. So that the buyers exit their long positions, we need to see the price passing both 0.8016 and 0.7959 in less than 15 hours. A fixing in the cross will cause a fall of the euro/dollar. As, for example, what happened at yesterday’s opening.
Whilst the euro costs less than 1.1410, nothing threatens the sellers. If there’s a depart from Friday’s range northbound, the weakening of the dollar will continue. On Wednesday I expect to see a V pattern from the euro. The FOMC minutes should make the situation clear.