The EUR/USD pair broke above the 1.3150 level at the end of the session on Friday, signaling a new leg of in this currency pair. Is because of this that we think a break above the highs from the Friday session will signal that the pair is prepared to grind higher, and aim towards the next major resistance area in the form of the 1.340 level. We actually believe that we will eventually at 1.35, but it will be a grind, not a shot straight up.
This is mainly predicated upon the Federal Reserve and its quantitative easing policies, and the fact that the European debt issue seems to be in the back burner right now. Going forward though, there will be shocks to the system that will cause this pair to be erratic at times, especially considering that we are in the last two weeks of the year which of course is typically low-volume trading.
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The EUR/USD pair shot straight up during the session on Wednesday as the Federal Reserve announced that it was going to continue its quantitative easing policies. Expansion should pump roughly another trillion dollars into the markets, and this of course should weaken the US dollar overall. Because of this, there was no surprise that the Euro gained. However, we do see the 1.3139 level as significant resistance, and you can see that the market struggle with it.
Because both currencies have a litany of problems, it is difficult to see how this market will breakout with any significance in the short-term. In fact, we are looking at it as a range bound market between 1.2660 and 1.3139 until we finally get some type of decisive move.
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After a last week in a bearish movement, the EUR/USD pair started pushing higher this week. Big question is where can we can expect Dollar to start pushing higher again? We got prepared for today two wave counts that will help us to determinate possible resistance point.
EUR/USD Possible Bearish Move Today?
According to Elliott rules B wave usually retrace 50-61.8% of the corrective A wave.
According to alternation count the EUR/USD pair is currently at the end of the 1 impulsive wave of the bigger (5) wave and in this count too we are expecting to see drop in this major pair soon. We know that wave 2 often retrace 50-61.8% of wave 1 so if we measure possible targets we would get same targets like we get in the Primary Count. So we need to wait for 2nd wave to broker lower channel support line at 1.3020 level so that we will have confirmation for entering a short position today.
Fundamental View
Today News from European union showed positive results but we still need to take a look at news coming from the United States:
- Import Prices m/m
- FOMC Press Conference
- Crude Oil Inventories
- 10-y Bond Auction
- FOMC Economic Projections
- FOMC Statement
This news can impact to our wave count and change our count completely.
Support and Resistance
(S3) 1.2865 (S2) 1.2896 (S1) 1.2951 (PP) 1.2982 (R1) 1.3037 (R2) 1.3068 (R3) 1.3123
Final Conclusion About EUR/USD
The EUR/USD finished the development of the corrective A wave and we are expecting to see the price drop today when development of the B wave begins. Potential Targets can be set at 1.2961 (50%) and 1.2941 (61.8%), for Stop loss we can use resistance at a level of 1.3080.
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On its 4-hour time frame, EUR/USD seems to be pulling back from its recent rallies as its currently edging towards the 1.3050 area. That level is closely in line with a former resistance level and the 38.2% Fib! Could 1.3050 hold as support from now on? Stochastic is still pointing down, suggesting that euro bears have enough energy to take the pair further south. Be careful when trading this one!
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The euro continued to move higher throughout friday, but remained well within its recent range, while global equities advanced as euro zone optimism picks up ahead of the weekend. While the timing of a Spanish bailout remains highly uncertain, there is growing consensus that an aid request it is more likely than not after S&P downgraded Spain’s rating on Thursday. As such a request would trigger ECB bond buying program and lead to a further reduction in the euro zone bond yields, it could at least a near-term boost to the euro and most risk-sensitive assets.
Meanwhile in the US, a report showed producer prices grew less than expected in September, leaving the Federal Reserve room to continue its USD-weakening QE program
Above, must be able to penetrate EURUSD 1.2990 to continue the rising trend, while below 1.2922 will determine, whether the pair will be back under the 1.2900 area
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EUR/USD back down as investors continued to worry about the condition of Greece and Spain and the EU situation that does not seem able to cope with everything. Most of the global economies are pointing towards the EU as the overall factor weighing down their economy. The IMF revisions in growth shows the contagion affects around the globe Caused by the ongoing EU dilemma. No matter how much the government stimulus around the globe approve, without a turnaround in Europe, it will be just good money after bad. China will not be Able to pull out of its slump unless the EU begins to order goods and the U.S. will not be Able to see earnings and growth, while the EU sucks down the profits of global companies.
Spanish bond yields rose after euro zone Finance Ministers said on Monday that Madrid do not need a bailout, adding to uncertainty about when the country will ask for aid, Widely seen as inevitable.
Concerns about Greece issue also resurfaced after the European Central Bank chief Mario Draghi told the European Parliament Committee that Greece has made progress on reforming its economy, but has more work to do.
Adding to the negative sentiment, the IMF cut its global growth forecasts for the second time since April and U.S. and European policymakers warned that failure to fix their economic ills would Prolong the slump
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The euro got beat up in yesterday's trading as risk aversion dominated market sentiment. It finished 56 pips lower against the dollar at 1.2971 and suffered an 88-pip loss to the yen at 101.61.
Skepticism over Spain's balance sheets continued to haunt the euro. EU finance ministers met yesterday and they reiterated that the country doesn't need a bailout. With a major bond auction coming up at the end of the month, investors are worried if Spain could find enough demand at relatively low yields for its bonds.
Heck, market junkies are so worried about the fourth largest economy in the euro zone, they shrugged off the official inauguration of the ESM. Yup, you read that right. The permanent rescue fund is now operational with a financial capacity of 200 billion EUR to replace the EFSF.
Of course, it didn't help that mixed economic data hit headlines too.
Although Germany reported a much smaller contraction at 0.5% of its industrial production for August versus the -0.7% forecast, the Sentix Investor Confidence index fell short of expectations. The figure for October printed at -22.2 indicating that investors are more pessimistic about economic conditions in the euro zone that analysts predicted with the consensus just at -20.6.
Our forex calendar is blank for top-tier data from the euro zone today. However, with the ECOFIN meetings still ongoing and ECB President Mario Draghi scheduled to speak later (7:30 am GMT), keep an ear out for updates regarding Spain! I have a feeling that more denials about the country's need for a bailout would only do more harm than good to the euro.
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The International Monetary Fund has cut its global growth forecasts for this year and 2013, a German newspaper said on Friday. Citing excerpts from the IMF’s World Economic Washington-based body predicted world economic growth of 3.3 percent in 2012 and 3.6 percent in 2013.
The week ahead is comparatively light in terms of economic data releases while there are certain important events pertaining especially to Euro Zone and sentiments are likely to be centered around these events. To start with, Euro Area finance ministers will be meeting in Luxembourg today and tomorrow and investors will be looking out for cues on Spanish bailout and issues between Greece and troika of IMF, European Commission and ECB. In the meeting, the ministers are expected to launch their 500 billion euro permanent bailout fund to support distresses euro zone nations. ECB’s Draghi will be speaking at European Parliament Panel on Tuesday and this event will be highly watched out for his comments as he had earlier announced that the outright monetary transactions program was ready for immediate use. Also, German Chancellor visiting Greece on Tuesday and G7 meeting on Thursday are the other important events. Among the economic data, US trade balance and PPI on Thursday apart from the weekly jobless data will be in focus. Earlier today, the German trade balance released showed an unexpected rise in exports in August while industrial production contracted 0.5 per cent from 1.3 per cent in July.
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EUR/USD flying after a statement from Draghi and
touch area of 1.3 as predicted yesterday. Draghi, in a news conference, vowed to preserve the euro zone's monetary system and its currency.
ECB decides to not change its main refinancing rate at 0.75%. The press conference was where all the action was, and it's difficult to imagine what new can be said as the ECB observes that Spanish politics are hindering Spain's interest in applying for aid that would trigger conditional ECB bond buying. A recent article may have it right stating "it's not clear that the ECB will be Able to rescue Spain even should it apply for aid, in light of the regional elections that will Conjure the risks to revenue sharing and political stability all the while as Spain risks missing near-term fiscal targets and higher capital requirements than its recent state-sponsored stress tests indicated. "
Meanwhile, U.S. initial jobless claims showed an increase to 367,000, which means an increase of 4,000. The number came a day ahead of the NFP report roomates for months has greatly affected commodity and currency prices. With the Federal Reserve's implementation of the open-ended quantitative easing, though, that unemployment number may have Affect today.
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Counted four times already EUR/USD tries to break 1.2950 as a strong resistance. Currently, the pair will conduct experiments for the fifth time. Meanwhile, the major trends are showing bullish area, still not break. It seems only a matter of time before the pair was able to pass through 1.2950 resistance. If this happens, then the EUR/USD will return perched in the range of 1.3.
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EUR/USD slightly stronger, thanks to lower Spanish bond yields as rumors circle that Spain is going request aid imminently. In addition, higher than expected Euro PPI suggest that there is ongoing inflationary pressure in the European system, which limits the ECB’s ability to cut interest rates. Today Spain released disappointing labor stats, with unemployment rising by 80k in September. The most important upcoming events for EUR traders are: Thursday’s ECB meeting and Friday’s NFP.
Markets are adding risk to portfolios putting some upward pressures on equities and commodities and downward pressure on the USD. News flow has been quiet, with most of the headlines focused on the RBA decision to cut interest rates by 25bpts. Yesterday’s stronger than expected US ISM is encouraging; however for markets the key inputs will come from tomorrow’s US election debate.
Yesterday’s speech by Chair Bernanke contained no market relevant new information and instead defended QE and suggested that the Fed was in no way monetizing debt.
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EUR/USD had a very quick turnaround following the release of U.S. PMI Manufacturing report. Now, this pair has bounces back down to almost 50% from the rise yesterday. The initial target for 1.2931 which is still above the upper limit of the channel to be pierced.
Spain and whether it is going to finally make a formal request for European bailout money continues to the hot topic. While this news has encouraged traders to pare their positions, the weakness has been orderly. Usually this indicates that traders have long been exiting their fresh short positions rather than entering the market.
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EUR/USD has experienced a significant weakening in the area yesterday, it was reinforced by fears of market participants to the conditions prevailing in Spain.
Current headlines are important; however are adding substantially to the general noise. What is important for EUR is:
1) The ECB has Decreased tail risk of an EMU breakup through the OMT,
2) Europe has Decreased the tail risk of a banking sector collapse through progress towards a banking union;
3) the key drivers in the near-term are central bank policy and the growth outlook. We have updated our EUR forecast to reflect this; increasing our targets for Q412 to 1:26 and leaving our targets for Q413 unchanged at 1:21 The next major event is the ECB on October 4th; however today's expected Spanish update from Moody's as well as the release of the Spanish bank stress tests could provide a knee-jerk reaction in EUR.
So the real crucial area is go round in early trade at the beginning of the month of October which was also initiated last quarter of this year. Many things that would make the road a bit bumpy at the beginning of this week, so ... traders ... let us count the risks we have :)
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EUR/USD finally closed just above its opening price of yesterday, in Greece there is growing speculation that the IMF, the EU and the ECB take the brunt of the concessions in the aid package of the country.
Risk events continues to be a major cause of the financial markets, however, reiterate that today and the future events are important, but are more used to create noise, while the week coming ECB (4 October) and non-farm payroll (October 5) release is major drivers.
Event risk continues to be an important driver of financial markets; however we re-iterate that today and tomorrow's events are important but serve more to create noise; whereas next week's ECB (October 4th) and non-farm payrolls release (October 5) will prove more important drivers.
Market dreary mood was seen ahead of the Spain's budget announcement, roomates could help pave the way for a bailout request and could implement more austerity measures amid mounting apprehensions in the country. Also, series of downbeat growth numbers out of the major economies of the world is also baffling investor sentiments. With the sluggish U.S. economy and the Fed's recent sounding pessimistic over economic activities, the annualized growth figures today could signify the current state of the economy. Also, shoring up the sentiments over the weekend ahead of a weeklong Chinese holiday, would be the manufacturing figures from largest metal consumer, derailing amid China growth story in the nation. In the wake of modest economic data, it remains to be seen if the Chinese central bank do any surprise sprung by boosting liquidity in coming days. On the whole, week's moves could remain engulfed to cues out of the U.S. and Europe.
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EUR/USD fell again today,
although as was previously thought, that after a disappointing New Homes Sales report from the U.S.. Sales were expected to print at 380K and markets were confident that the forecast would be positive, instead the final report Showed only 373K.
Today, the release of the joint German, Finnish and Dutch statement on the ESM combined with news that Spanish GDP will be far lower than expected helped push EURUSD below 1.29. This was Followed by the release of disappointing Italian retail sales (falling -0.2% m / m and 3.2% y / y) and ongoing fears that Greece will fail to meet the Troika's demands, roomates Provided the catalyst for the final leg lower in EUR .
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Having successfully penetrated FIBO 23.6 in asia session
after two days of trying and failed, EUR/USD bears apparently will have a smoother path. Currently it is still stochastic in oversold area, but in fact this pair is in a descending channel.
With next support at 1.2820 then 1.2750 is only a matter of time before the bears arrived at that level.
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EUR/USD decline halted, along with market sentiment positive welcoming comments from the German Finance Minister said that the defence's euro is an act that deserves.
Spanish and Italian yields rose as the report adds to the nervousness of investors about when the schema of the ECB, which aims to reduce the cost of borrowing that fight emitting sovereigns of the zone euro, was going to start.
Investors were already nervous about Spain evident reluctance to seek a rescue - a condition for purchases of bonds the ECB - and the uncertainty was likely they underpin the German Bunds of safe haven in the coming days.
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EUR / USD dropped yesterday as
was previously thought, as market participants were concerned about the problems in greece, spain and italy.
But to this day, seems today more technical will affect the market.
Having failed to break FIBO 23.6 yesterday, it seems the pair will re-test those levels, with a bunch of possible correction to 1.2980. If this scenario is running, then FIBO 38.2 will be the main objective.
(Learn more about FIBO)
.
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EUR / USD tried to penetrate the 1.3040 area yesterday Friday to resume its rally. but the attempt failed and the lead pair is back under 01.03 area
Currently 1.2750 area into a strong support below, and chances are that the market will take this pair to test that level.
If this scenario occurs then 1.2750 will be the determinant of whether the market will buy low or sell high.
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EUR/USD continues to decline, although it was briefly touched 1.2915 before closing the session a correction America. Global market sentiment turned negative after Chinese manufacturing data, Japanese and European manufacturing trade balance which indicates economic growth is slowing, traders began to wonder whether the stimulus offered by the central bank will be adequate for the economic recovery.
U.S. data and the
Philadelphia Fed Index rose, it is surprising the market and strengthening USD.
Meanwhile, in the D1 chart we can see that the correction of the pair because he was offended at the FIBO 23.6 stochastic but it seems this will allow the pair to go down deeper.
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