EURUSD, Daily
On May the 1st I wrote: EUR is strong across the board this morning but at some point reversion to mean kicks in and this market will react lower. EURUSD started turning lower that very same day and has been moving lower since. It is breaking intraday supports and honouring resistance levels. Stochastics are rolling over and price is trading inside the Bollinger Bands. At the time of writing the pair is at 23.6% Fibonacci level that coincides with April 30th daily lows. The 1.1035 to 1.1052 support area is a likely target on the downside if the 23.6% level is violated. Yesterday was light on economic releases. US factory orders bounced 2.1% in March, right in line with median expectations versus -0.1% in February.
Currency Pairs, Grouped Performance (% Change)
As I suggested last week the US Dollar index has been strong since DXY hit support at 94.91 and after a slow start it has moved higher over the last couple of days. The AUD strength that followed the 0.25% rate cut has been a surprise and has raised eye brows on Bloomberg TV this morning. Aussie dollar is strong across the board with EUR, CAD and CHF being the weakest currencies against it. EUR being weak against everything else probably isn’t any surprise to regular readers of Currency Movers report. EURUSD trading lower from a resistance level has been dragging the other EUR pairs lower with it and this has created trading opportunities in these pairs. One of them was EURJPY which I analysed in yesterday’s Multi Time Frame article. GBP pairs have not moved much yet but with the election looming just a couple days from now there could be some more volatility ahead. EURGBP looks interesting as it rallied so strongly over the last week. After hitting my target range of 0.7376 to 0.7422 the pair has turned lower and could provide further opportunities for short term traders with volatility likely staying high.
Main Macro Events Today
- RBA Cash Rate: The RBA cut the cash rate by 25 bp to a record low of 2.0%, as was largely expected. A reference to the currency in the statement gets to the crux, that a further fall in the Australian dollar is necessary. The RBA would have been discomforted by last week’s surge in AUD-USD to a three-month high at 0.8075. The central bank also cites weakness in capital expenditure as a key risk, and notes that spare capacity will remain in the economy for some time.
- Spanish Unemployment isexpected to drop by 64.8k compared to previous change of -60.2k.
UK Construction PMI isseento stay almost unchanged. Median figure points to a slight 0.2 point dip.
- CAD Trade Balance is projected to improve to a C$0.9 bln deficit in March from the C$1.0 bln shortfall in February.
- US Trade Balance islikely to increase by 25% to -$44.5 bln in March (median -$40.3bln) from -$35.4 bln in February.
- US ISM Non-Manufacturing PMI is expected to hold steady from 56.5 in April. This compares to a recent high of 58.8 in November.
Clickhere to access the full HotForex Economic calendar.
Janne Muta
Chief Market Analyst
HotForex
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