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Eurobears Taking the Rate to a 1.1097 from 26th January Minimum

For the last two weeks, the euro/dollar pair has consolidated around the price range 1.1278-1.1449. A break in the lower limit happened on Thursday (26th February) following the release of American reports in which inflation and orders for durable goods were higher than expected. Daily euro losses against the dollar reached almost 160 points.

In the first half of Friday, the euro hit a minimum of 1.1183 to 1.1244. The correction was 45 degrees. The fall in the euro continued as it did on Thursday following the publication of the American statistics.

The “Eurobears” reacted weakly to the updated GDP information for Q4 since at the same time mixed dynamics for the main pairs were being observed on the currency market. GDP/USD and AUD/USD dropped, whilst EUR/USD traded for 30 minutes at the 1.1225 mark. Within the next hour, on the back of a fall in the EUR/GDP, the euro reached a new minimum for the week against the US dollar, while GDP/USD and AUD/USD slid.

The US economy in Q4 of 2014 grew by 2.2% (YOY). The second assessment turned out to be lower than the first (2.6%), but more than forecasted (2.1%). Additional support from the dollar came from the Reuters/Michigan US consumer confidence index. The index increased from 93.6 to 95.4, exceeding the forecasted 94.0.

Uncompleted deals for the sales of housing turned out to be less than the forecasted 1.8% and had grown by only 1.7%. Here it’s worth pointing out that the indicator for December of last year was reassessed and increased from -3.7% to -1.5% (a positive for the US dollar).

The Euro/dollar closed under the 1.12 mark for the week. On Monday the market opened with dollar growth. The euro’s fall throughout the market was caused by the People’s Bank of China’s decision on 28th February, whereby its press office made a statement saying the bank would reduce base rates for credit and deposits from 1st March by 0.25% to 2.5%.  The interest rate for credit in yuan was reduced to 5.35% annual.

Today is Monday. For me this day is always a corrective day in relation to Friday. The economic calendar for Monday is dense; however market participants may ignore the news (the Monday effect). It’s worth separating the business activity index in the industrial sector and the report on consumer inflation in the Eurozone from the macro data.

I’d like to remind you that the ministry of finance for the Eurozone has approved the plan for economic reform set out by the Greek government. Tensions have loosened but market participants are still awaiting an interest rate hike by the US Fed at some point in the middle of the year. The “Eurobears” will now try to strengthen below 1.11. Candles for the month are showing a long-term fall in the EUR/USD. The closest target, 1.1097, is a 26th January, 2015 minimum.

Let’s not forget that this week will see three banks convene: the RBA, the ECB and the Bank of England. A report on the American labor market will be released on Friday. A growth in employment values in February will increase the probability of an interest rate rise in June.

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