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EURUSD: the euro stabilises on the balance line in anticipation of new drivers


On Monday, the 15th of October, trading on the euro closed up. The euro won back all the losses suffered on Friday. The euro retreated from a low of 1.1535, but I do not understand what lead to buyers recovering Friday's losses. The US government bond yields were ranging. We're left thinking that with the remaining problems for the euro, its strengthening was caused by the general weakening of the dollar on an empty calendar.

Day's news (GMT+3):

  • 11:30 UK: claimant count change (Sep), ILO unemployment rate (3M) (Aug), average earnings (Aug).
  • 12:00 Germany: ZEW Survey - economic sentiment (Oct).
  • 12:00 Eurozone: ZEW Survey - economic sentiment (Oct), trade balance n.s.a. (Aug).
  • 15:30 Canada: Canadian portfolio investment in foreign securities (Aug).
  • 16:15 US: industrial production (MoM) (Sep), capacity utilization (Sep).
  • 17:00 US: NAHB Housing Market Index (Oct), JOLTS job openings (Aug).
  • 23:00 US: net long-term TIC flows (Aug).

Fig 1. EURUSD hourly chart.

Current situation:

Monday worked against Friday. I ignored the reverse, as in our analysis the market relied on it opening with a decline on the pound and the euro from the failed Brexit talks over the weekend.

Yesterday, British Prime Minister Theresa May said that serious progress had been made in the Brexit negotiations. Bloomberg, citing an unnamed EU diplomat, said key issues remain unresolved.

A double top was formed on the hourly time frame. The first confirmation was received during the Asian session - the breakout of the trend line. According to this, the target is at 1.1500. I did not make a forecast today as I think it might not work out. The pound isn't weakening. If the market in the European session ignored geopolitical factors, the price could easily go above 1.1600. A return to 1.1600 will indicate that the market is ready to break the resistance.

Now all eyes are on the situation in Italy, where the government should submit a draft budget for 2019 to the EU. On Wednesday, the US Fed will publish the minutes. The technical picture indicates that the euro will dip to 1.1540, and the latest news from the UK indicates it will strengthen. The price is on the lb balance line. The pair on the hourly period is on the balance point, and the price is ready to deviate from it. If there is a breakout at 1.1610, then buyers will move to 1.1685.

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