Posted on May 18, 2015 10:03
The euro is consolidating in early week trade after logging a three-month high against the dollar at 1.1466 on Friday. EURJPY and other euro crosses have also shown a similar price action. Recent signs of green shoots in economic vitality in the euro area and the associated view that the ECB may be obliged to taper its QE program at some point has supported euro. In addition, an optimistic view on the Greece situation, has helped to maintain the euro’s underpinning. In April Draghi said that the European Central Bank has no plans to curb or curtail its money-printing programme although it expects euro zone economic recovery to broaden and strengthen. Another likely reason for EURUSD strength has been the soft macro data coming from the US. From retail sales to PPI and Consumer Sentiment figures the data have been softer than expected.
Since last Tuesday EURUSD has rallied strongly and reached the proximity of 1.1480 resistance. After rising for four days the pair has reacted lower and is at the time of writing attracting buyers at 1.1370 intraday support. This level is also a daily candle high from 6th of May. With support levels being fairly close to the current prices a major correction lower without strong external event is not looking very likely. Therefore, after moves to support levels we should monitor price action for long entry signals. Daily close from 6th May coincides roughly with Friday’s low of 1.1324 and therefore is the nearest support level in the daily chart. Other support levels are at 1.1206 to 1.1232 (a 23.6% Fibonacci level) and 1.1035 to 1.1084 (a 38.6% Fibonacci level). The nearest resistances are 1.1480 and 1.1534. EURUSD is trading close to a resistance level but seems like it might be trying to push higher. However, as the weekly high of 1.1534 is relatively close it is better to trade the long side with a short term expectation only and monitor price action closely.
Currency Pairs, Grouped Performance (% Change)
Since the weekly close on Friday the 15th May we’ve seen USD and JPY weakness and EUR strength against the other major currencies. GBP has been also gaining against the majors but not as strongly as EUR. Today’s action has been a bit subdued with USD gaining against the others and EUR being strong only against the NZD. The latter has been weak pretty much against all the currencies today. Markets have been quiet this morning as we’ve only seen the early hours trading of the first day of the trading week with not much macro data to move the market.
Main Macro Events Today
Japan’s Tertiary Index, agauge of services fell by 1.0% m/m in March. Contraction was deeper than expected (-0.5%) after the 0.4% m/m gain in February.Japan Industrial Production fell 0.8% m/m in March (consensus -0.3%) while y/y drop was 1.7% after the previous drop of 1.2%.Switzerland Real Retail Sales surprised to the downside in March with a bigger than expected drop of 2.8% (consensus -2.0%).NAHB Housing Market Index: no major change expected from last figures.
Chief Market Analyst
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