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Fall in Euro; Fall in Volumes



The euro/dollar on Monday closed doji. This is a candle whose closing price is the same as that of the opening. A spike in volatility took place on the American session when Yellen spoke.

Yellen said that the labour market data gives the central bank cause for concern, but they won’t rush to make conclusions based on one report. On the whole the labour market situation is decent: unemployment benefit numbers are low and wage growth should push up inflation. A further gradual increase in the interest rate will take place if the labour market improves and there is inflation growth.

At the beginning of her speech the euro/dollar fell to 1.1325. Then the pair was trading for around half an hour at 1.1360. Having updated the day’s maximum, the rate returned to 1.1350.

Market Expectations:

On Tuesday the news is less than ample. If the USD can’t pick itself back up after Yellen’s speech, this means we should expect another wave of weakening. Since the euro is fighting up at the top of the MA channel after Friday’s rally, I’m limiting the strengthening to 1.1406. The sharper the bounce from 1.1406, the higher the likelihood of a correctional movement to 1.1320 on Wednesday and to 1.1250 on Thursday.

Day’s News (EET):

  • 12:00, Eurozone reassessed GDP for Q1 of 2016;
  • 17:00: Canadian business activity index for May from Ivey;
  • 23:35, weekly oil reserve report from the API.

Technical Analysis:

Intraday forecast: minimum: 1.1339, maximum: 1.1406, close: 1.1368.

Euro/dollar rate on the hourly. Source: TradingView

The euro/dollar spent pretty much all day by the U3. According to the AO and CCI indicators, bull divergence has formed. Only the AO indicator is already above the zero line and the oscillator stochastic is in the buy zone.

There’s another important factor that’s worth attention. A fall in prices means a fall in trading volumes. This indicates that we are seeing an accumulation phase. Taking the factors listed above into account, I reckon the euro will weaken against the dollar to 1.1339 and then grow to 1.1406.

The distance between the 1.1373 and 1.1392 maximums is 21 hours. I expect to see three peaks by the U3. The third peak should form at 17:00 EET. My forecast will cancel if there’s a close of the hourly candle below 1.1324. If you’re buying euro, do so from the LB.


Source: https://alpari.com/
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