Daily EUR/USD analysis by Capital Trust Markets

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Hello Fellow Traders and Forum Members,

We are a team of Market Analysts, Traders and Technical Strategists at Capital Trust Markets. We intend to post daily EUR/USD analysis and opinion based articles in hopes of sharing our insights and thoughts with our fellow trading community. Our articles will consist of signals, forecasts, technical analysis, fundamental analysis and trend identification.

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EUR/USD fell sharply after the Fed tapering decision last week; the pair is headed towards the 1.3600 zone amid renewed bullish momentum in the US Dollar (USD) and concerns about European Central Bank (ECB) monetary policy stance.

Technical Analysis

The pair is being traded around 1.3766 at 02:00 GMT in Asia. Support may be noted near 1.3722, the 50% fib level, ahead of 1.3670 that is the channel support as well as the 61.8% fib level. A break and daily closing below the channel should accelerate the bearish trend, opening doors for the 1.3500 handle.

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On the upside, immediate resistance is sitting in near 1.3851, the 23.6% fib level, before the channel resistance which is currently around the 1.3900 handle.

Markit PMIs

Markit Economics is due to release the Purchasing Managers Index (PMIs) of France, Germany and the Eurozone. According to median projection of different analysts, Germany’s manufacturing PMI declined to 54.7 points in March compared with 54.8 in the month before while the services PMI ticked down to 55.8 compared with 55.9 in February. Similarly, manufacturing PMI in the Eurozone remained steady at 53.2 in March compared with the same reading in the previous month, the forecast added. Better than expected PMI readings will be seen as bullish for EUR/USD and vice versa.

US Data

Today in the US session, the Federal Reserve Bank of Chicago is going to release the Chicago Fed National Activity Index for the previous month. Similarly, Markit Services will also release the March manufacturing PMI data for the US. According to the forecast, US manufacturing activity in March declined to 56.6 as compared to 57.1 in the previous month.

Conclusion

The long to medium term trend is bullish for EUR/USD because the pair successfully printed higher high on the daily chart in the previous upward wave. So buying near the channel support could yield favorable results.

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Yesterday, in the European session at GMT 09:00 AM, the Euro zone manufacturing and services flash purchasing manager indices (PMI) were released by the Markit Economics. The aggregate numbers for March were pretty much in line with the expectations, and declined to 53.0 from 53.2. The report supported the story of slow but stable economic growth, and highlighted the reasons for a 3-month low.

Eurozone Manufacturing PMI
The report suggests that manufacturing output and new orders both increased for the ninth successive month, and continued to enjoy its strongest spell of growth. There are possibilities that the growth could pick up in April, which is a positive sign. The highlight of the story was the change in output and new orders for France, which returned to growth in March, as manufacturing PMI posted a massive gain from 47.9 to 51.6. This is the sharpest rise in 31 months. The other side of story was slow output growth in both manufacturing and services for Germany, registering a 4-month low of 53.8.


The surprise from France was cheered by the market, and a sudden jump in EURUSD was registered, but the deterioration in Germany halted the rise in the pair. The decline in EURUSD was limited, as the report suggested that the rate of growth activity may stabilize in April.

US Manufacturing PMI
At GMT 01:45 PM, the Markit Economics released the flash purchasing manager indices (PMI) for US. The manufacturing PMI for US dipped from 45-month high recorded in February (57.1) to 55.5. The decline was sharp, but one cannot overlook the fact that growth is still healthy, as the business conditions continue to improve. The best part of the report was the increase in employment suggesting stronger growth seen on average. The Chief Economist at Markit, Chris Williamson mentioned in the report that “the manufacturing PMI adds to evidence that the sector has shrugged off the weather-related weakness seen earlier the year, with strong demand encouraging firms to expand and hire new staff at a robust pace”.

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The growth in the sector was not as strong as February, but that doesn’t mean output and new orders declined heavily in March, and would discourage Fed to re-analyze the situation for reducing its asset purchases.

Most majors climbed post the release. EURUSD and AUDUSD were the biggest gainers in the US session. EURUSD rose to 1.3874 and AUDUSD climbed towards the 0.9150 level.

Technical Analysis
EURUSD fell to 1.3760 in the European session yesterday after a failure around the 1.3820/30 levels. However, the pair later recovered most of the ground, and bounced sharply in the US session to trade above the 1.3850 level. EURUSD buyers failed to push the pair above the 1.3870 level, which represents a triple confluence zone. 50 moving average, 50.0% retracement level of the last leg lower from the 1.3972 high to 1.3756 low and the broken 4 hour bullish trend line sits around the same zone.

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The pair as of writing is trading below the 100 MA on the 4 hour chart, and if 200 MA continue to provide support to the pair, then chances of a renewed uptrend in the short term might improve. The Euro bulls need to take out the 50 MA, and down-move trend line connecting last major highs in order to accelerate higher.

KEY SUPPORT AREA: 200 MA (4H)
MAJOR RESISTANCE ZONE: 1.3870/80

Prepared by Aayush Jindal, Chief Technical Strategist at Capital Trust Markets

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The US economy is set to print its durable goods orders data for the month of February in today’s New York trading session. The headline figure is projected to show a 1.1% increase while the core version of the report is estimated to show a mere 0.3% uptick.

Recall that the US economy printed mixed results for the durable goods orders report in the previous month. The headline figure showed a 1.0% decline instead of the estimated 0.7% dip while the core figure had a stronger than expected 1.1% rise. Taking a look at EUR/USD’s reaction when the report was released in February 24 shows that the dollar gave up a lot of ground then, as traders speculated that the FOMC might pause with its taper plans.

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However, the latest FOMC statement turned out to be hawkish as the central bank carried on with its $10 billion monthly taper while Yellen hinted that a rate hike might take place around six months after stimulus ends. With that, the US dollar is drawing support from strong fundamentals lately.

In line with this, higher than expected gains in durable goods orders could provide a strong boost for the dollar, as it would support Fed officials’ positive outlook for the economy. On the other hand, lower than expected results might force the dollar to return some of its gains to the euro. Bear in mind though that EUR/USD is under selling pressure since a few ECB officials have brought up the idea of implementing negative deposit rates once more. After all, the euro zone could benefit from a weaker euro and might need a boost in price levels to prevent deflation from taking hold.

In addition, given the divergence in monetary policy biases of the Fed and the ECB, the reaction of EUR/USD might be sustained if the durable goods orders release confirms a recovery in the US economy.

Prepared by Aayush Jindal, Chief Technical Strategist at Capital Trust Markets

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The US economy is scheduled to release its pending home sales data in today’s New York trading session. For the month of February, only a mere 0.1% uptick is expected to follow the previous month’s 0.1% increase. This would signify a downturn in the US housing market, especially if the actual figure comes in short of expectations.

Bear in mind that this report has been churning out weaker than expected results for the past seven months, with five of those showing declines. Another weaker than expected release could push the dollar lower against its counterparts, which might be enough to give EUR/USD a boost.

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Take note though that this pair has been unable to take advantage of the wave of dollar weakness than ensued yesterday, as the euro zone economy has shown its share of weak spots as well. Earlier this week, there have been talks of negative deposit rates from the ECB, as central bank policymakers are looking at various options to keep the euro’s rallies at bay and to ward of deflationary pressures.

A quick look at the previous pending home sales release back in February 28 shows that the US dollar sold off during the actual release, consolidated, then resumed its selloff in the coming days. Of course this was brought forth by other economic reports from the US and euro zone, as well as changes in market sentiment, but there’s no denying that the weak data contributed to the dollar’s decline.

On the other hand, a strong rebound in pending home sales could trigger a downside break for EUR/USD. After all, the pair has recently broken below a rising trend line on a shorter-term time frame, which is an early hint that a downtrend might be in the cards.

Prepared by Aayush Jindal, Chief Technical Strategist at Capital Trust Markets

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Euro fell broadly against the greenback on Thursday after better than expected US economic reports. The pair is eyeing Germany’s inflation report and US consumer confidence figure for short term direction; both the reports are scheduled for release today.

Technical Analysis

The pair is being traded near 1.3743 at 2:50 GMT in Asia. Immediate resistance can be seen near the 1.3800 handle that is the channel resistance, 38.2% fib level as well as psychological level. A break above the channel resistance shall open doors for further rallies toward 1.3920.

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On the downside, the pair is likely to find support near 1.3717, 50% fib level, ahead of 1.3670 that is the channel support as well as 61.8% fib level. A daily close below the narrow downward slope should push the pair into stronger bearish trend, threatening the 1.3500 handle.

Reuters Consumer Sentiment Report

Today Reuters and the University of Michigan are going to release their joint US consumer sentiment report for March. The monthly report, prepared on the basis of thousands of surveys and questionnaires, shows the level of confidence among the US consumers. Generally speaking, the high consumer confidence is taken as positive for the US economy and vice versa. The report is scheduled for release at 14:55 GMT.

The consumer confidence in the US declined to 80.6 points in March as compared to 81.6 points in the previous month, says the median projection of different economists. Better than expected actual outcome will be considered bullish for the US Dollar (USD) and vice versa.

Germany Inflation

Statistiches Bundesamt Deutschland is due to release Germany’s inflation report today. According to forecast, the Consumer Price Index (CPI) declined in March to 1.1% as compared to 1.2% in the same month of the year before. Better than expected actual outcome will be bullish for EUR/USD and vice versa.

US Job Data

The number of people who claimed unemployment benefits, during the week ended on March 21, declined unexpectedly to 311K as compared to 321K in the week before, analysts had predicted an increase to 325K, a report by the US labor department revealed yesterday. Similarly, the total number of people claiming jobless benefits declined to 2.823 million during the week ended on March 15 as compared to 2.876 million in the week before, a separate report by the labor department said.

Conclusion

EUR/USD is being traded in a narrow downward slope channel; a breakout will provide clear direction to the pair.

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EUR/USD last week found support near the 50% fib level; the pair is expected to hold range ahead of the Eurozone inflation report which is scheduled for release today at 9:00 GMT, according to forecast inflation declined to 0.6% this month as compared to 0.7% in the same month of the year before.

Technical Analysis

EUR/USD extended the upside movement today in the early Asian session. The pair is expected to face hurdle near 1.3780, 38.2% fib level, ahead of 1.3850-90 that is the channel resistance and 23.6% fib level. A break and daily closing above the channel might push the pair into stronger bullish trend, exposing multi-month highs above 1.3966.

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On the downside, the pair is expected to find support around 1.3721, 50% fib level, ached of 1.3670-80 that is a confluence of 100 Daily Moving Average (DMA), 61.8% fib level and channel support. A daily close below the channel support should trigger more dips towards the 1.3500 handle.

Germany Retail Sales

Germany’s Statistisches Bundesamt Deutschland is going to release today the retail sales report for the previous month. According to forecast, the sales declined by 0.8% in February as compared to 0.9% in the same month of the year before. Similarly, the sales declined by 0.5% last month as compared to 1.7% increase in the month before.

France Fourth Quarter GDP

France’s fourth quarter Gross Domestic Product (GDP) report is also scheduled for release today. The French economy grew at a steady rate of 0.3% as compared to the same growth rate in the quarter before, the median projection of different analysts says. Better than expected GDP reading will be seen as bullish for EUR/USD and vice versa

Chicago Purchasing Managers Index

MNI Deutche Börse Group will today release the US PMI report for March. According to forecast, the PMI declined to 58.5 points this month as compared to 59.8 points in the month before. Generally speaking, a high PMI reading is seen as bearish for EUR/USD and vice versa.

Yellen Speech

Fed Chair Janet Yellen is also due to speak today. She might give explanation on her surprise remarks at the monetary policy press conference on March 19. Investors were stunned as Yellen indicated the first rate hike as soon as the next six-month period, in contrast to the Fed forward guidance stance.

Conclusion

EUR/USD is directionless as far as the price is hovering within the daily triangle. Eurozone inflation report and ECB monetary policy, which are due this week, might provide clear direction to the pair.

Prepared by Usman Ahmed, Chief Fundamental Strategist at Capital Trust Markets

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EURUSD buyers were unfazed by the preliminary inflation report for the Euro zone released yesterday. The report suggested that Euro area annual inflation is expected to be 0.5% in March 2014, down from 0.7% in February. The outcome was on the negative side, as it might weigh on the ECB to act in the coming meetings. EURUSD spiked lower towards 1.3710, and then traded back above 1.3780 level.

German Unemployment report
About an hour ago, German unemployment data was published by the German Statistics Office. The outcome was surprising, as roughly 41.7 million persons resident in Germany were in employment in February 2014, and German unemployment rate now stands at 6.7%, beating the expectations of 6.8%. The previous reading was also revised lower from 6.8% to 6.7%. Overall, data was impressive, and as a result EURUSD jumped higher to overtake the 1.3780 level again.


Technical Analysis
EURUSD is approaching 38.2% Fibonacci retracement level of the last leg lower from 1.3972 high to recent 1.3710 low. The pair has breached the 50 and 200 simple moving average on the 4 hour timeframe. There is a channel forming, which can act as a catalyst for the pair in the coming days. On the upside, 1.3840 level might act as a hurdle for the pair. It represents triple confluence zone of 50% Fibonacci retracement level, channel resistance zone and 100 SMA. A break above this resistance zone might open the doors for a test of 61.8% Fib level.

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On the downside, 50 simple moving average is seen as immediate support, followed by 1.3750, where buyers have appeared time and again. Any further bearish momentum might take the pair towards the channel trend line and previous swing support zone at around 1.3700 level.

Prepared by Aayush Jindal, Chief Technical Strategist at Capital Trust Markets

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Euro (EUR) extended gains against the US Dollar (USD) on Wednesday, for the fourth day in a row, ahead of the Eurozone Gross Domestic Product (GDP) release for the fourth quarter.

Technical Analysis

EUR/USD is being traded around 1.3803 at 2:30 GMT in Asia. Resistance may be seen at 1.3844, the channel resistance of the daily rising wedge formation. A break and daily close above the channel resistance might push the pair into stronger upside momentum, opening doors for the 1.4000 milestone.

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On the downside, the pair is likely to find support at 1.3780 that is the 38% fib level ahead of 1.3719 that is a confluence of the 50% fib level and 55 Daily Moving Average (DMA). The pair is bullish in the long term because of the Higher High (HH) in the previous upward wave.

Eurozone GDP Report

The shared economy grew at a stable rate of 0.5% in the previous quarter as compared to the same rate in the same quarter of the year before, the average forecast of different economists says. Similarly, the economy managed to grow at 0.3% in the fourth quarter compared with the same rate in the quarter before, the forecast added. Better than expected GDP data will be seen as bullish for EUR/USD and vice versa.

US Factory Orders

The Census Bureau of the US is scheduled to release the factory orders report for the month of February. According to forecast, the number of orders received by the US manufacturers rose to 0.9% in February as compared to 0.7% decline in the month before. Generally speaking, higher factory orders are considered good for the economy and vice versa so EUR/USD might come under selling pressure if the factory orders report comes better than expectations.

Conclusion

EUR/USD is likely to test the channel resistance but an upside breakout is not expected before the European Central Bank (ECB) monetary policy announcement, buying on breakout could be a good strategy for EUR/USD.

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EUR/USD fell yesterday ahead of crucial monetary policy announcement by the European Central Bank (ECB) on Thursday; the pair might break the ascending daily triangle after the ECB event.

Technical Analysis

The pair is being traded near 1.3761 at 2:40 GMT in Asia. Hurdles may be seen around 1.3780, the 38.2% fib level, ahead of the channel resistance which is currently sitting in near 1.3844. A breakout through the upper trendline resistance will trigger a renewed buying pressure, validating a move above the 1.3900 handle.

On the downside, the pair is expected to find major support around 1.3720 that is a confluence of 50% fib level and 55 Daily Moving Average (DMA) before the channel support as demonstrated in the above chart. The pair might begin a steeper downside trend on a daily close below the channel support.

Markit Services PMI

Today Markit Economics is due to release the services PMI report for the Eurozone. According to forecast, services activity in the Eurozone declined to 52.4 in March as compared to 52.6 in the month before. Similarly, Markit Services Composite also dropped to 53.2 points last month compared with 53.3 points in the month before, the forecast added.

ECB Monetary Policy

ECB will today announce its decision on the benchmark interest rate. Analysts have predicted no change in the monetary policy despite recent dip in the inflation and below average quarterly growth figure. It is pertinent that ECB head Mario Daraghi had reiterated on several occasions that the central bank would not hesitate in adopting some new and harsh policy instruments to cope with the fragile growth across the Eurozone and continuously falling inflation. It should also be noted that the central bank had cut the interest rate to a record low level of 0.25% in November against the forecasts of a majority of analysts.

Conclusion

If the central bank leaves the monetary policy unchanged, then we might observe a relief rally above the 1.3900 handle, breaking the channel resistance.

Prepared by Usman Ahmed, Chief Fundamental Strategist at Capital Trust Markets