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EUR/USD: expected fall to the balance line


On Tuesday the euro/dollar closed up. The euro rose against the dollar by 1% to 1.0710 (session maximum fixed at 1.0720) and lost out by 2% against the pound, falling to 0.8626. The GBP rose against the dollar by almost 4 figures after the UK PM spoke.

Market expectations:

On Tuesday the euro’s strengthening stopped when the euro/dollar flipped upside down. The pair is currently in a correctional phase. The price has been consolidating for 14 hours in a 1.0690-1.0720 range.

If we take a look at the daily graph ten the euro bulls look to be aiming for the 1.0873 maximum from 8th December, 2016. Since the market is being dominated by euro sales at the moment, it’s likely that the market will balance itself by knocking off the sellers’ stops who believe in parity.

On 17th January the USD reacted to Trump’s interview with the Wall Street Journal by falling in Asia. In the interview he said that a strong dollar is harmful for US competitiveness.

By looking at the cycles and past patterns, I can’t see any way the euro will strengthen against the dollar today. To head up, the price would need to return to the balance line at 1.0645 (at the time of writing this analysis). Since the Fed’s Yellen is speaking late this evening, in my forecast I’ve gone for a drop to the LB at around 1.0667.

Day’s news (GMT+3):

  • 10:00, German definitive CPI for December;
  • 12:30, UK average salary for November, number of unemployment benefit applications in December and unemployment level in November;
  • 13:00, Eurozone definitive core CPI and CPI for December;
  • 16:30, Canada, December core CPI and CPI;
  • 17:15, US December industrial production and capacity utilisation;
  • 18:00, BoC January interest rate decision and monetary policy report;
  • 19:00, FOMC member Kashkari to speak;
  • 19:15, BoC press conference;
  • 22:00, US Fed Beige Book to be published;
  • 23:00, US Fed’s Yellen to speak.

Technical analysis:

Euro/ rate on the hourly. Source: TradingView dollar

Intraday forecast: minimum: 1.0669, maximum 1.0715 (current Asian), close: n/a. Not taking Yellen speaking into account

On Tuesday the euro closed up. Its strengthening stopped at the 112-135 degree zone after UK PM May spoke about Brexit. A sharp fall in the cross with the pound didn’t allow the euro to strengthen any more. The rate corrected form a maximum of 1.0720 at 45 degrees. Therefore the new levels upwards are from the 1.0667 minimum.

According to data from myfxbook.com, 70% of traders are in selling positions. This is a lot, and with so many ready to sell euro, the market will look for a balance point at higher levels. As I said above, the buyers are aiming for the 1.0873 maximum from 8th December last year on the daily time period. On the way there the interim resistances of 1.0745 and 1.0775 must be passed.

So what can we expect for today? On Wednesday Yellen is speaking. Due to this I think there wil be a correction to the LB. Due to the comments from Trump and the weakening of the dollar, the euro has lifted to 1.0720 despite my analysis and forecast. I’m still waiting for a bounce to the LB.


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