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27 Apr 2013
Forex: EUR/USD on wait and see mode ahead the big bank's week
FXstreet.com (San Francisco) - The Euro traded mostly sideways on Friday against the Dollar. The pair was unable to break above the 1.3035 resistance and it closed the day at 1.3030. The EUR/USD seems to be trading in wait and see mode just ahead of the big banks week ahead when the Fed and the ECB will hold their monetary policy meetings.
The EUR/USD closed its second negative week in row, extending declines from the 1-month high at 1.3200 reached on April 16. On the daily chart, the pair is slightly bearish according to the Fxstreet.com's trend index. Indicators such as CCI and Momentum are bearish while the Stochastic is neutral and the MACD is bullish.
"The EUR/USD has spent most of the last two weeks trading in a tight range, trapped in between Fibonacci levels," FXstreet.com's analyst Valeria Bednarik comments in a recent report. "After a non lasting test of 1.3200, the pair retraced all the way back to the 23.6% retracement of its latest daily fall from 1.3710 to 1.2744, around 1.2970."
The week ahead
Speaking about the days to come, as BK Asset Management's analyst Kathy Lien says it’s better to "strap on your seatbelts." Next week will have a bunch of volatility as key economic data are schedule across the world.
Market will be focusing mainly on the Fed and ECB meetings and the NFP report. Lien doesn't expect "much from the FOMC statement. Instead, non-farm payrolls will be the number to watch." The market consensus on NFP is about 160K new payrolls in April, well below 2012 average of 180K. In this line, Lien states that "the performance of the dollar could be mixed in the coming days depending upon how Chinese, U.K. and Australian data fare and whether the ECB cuts interest rates."
The UBS analyst team states that "with the latest indicators pointing to improving conditions, consensus expects a better payrolls report." Looking the March's figures at 88K new payrolls, the April's "nonfarm payrolls should increase by 145K and private by 170K, while the unemployment rate is expected to remain unchanged at 7.60%."
A reading below expectations, especially below 100K, would drive the USD lower. On the other said, a "job growth between 100K to 175K will be a relief for the Fed but probably won't inspire much optimism in the market," Says Lien. She believes that market needs to see a "job growth in excess of 200K" to fuel confidence.
The big bank week
With the recent economic data, it seems status quo in the United States will remain unchanged. "All talk of imminent QE downscaling can be forgotten for a while," as ING said in a report following the US Q1 GDP.
But the situation in Europe is kind different with Spain (27.2%), France (11.5%), Italy (11.6%), Greece (27.2%), Portugal (16.9%) and the whole Eurozone with 12% are in a desperate situation. Forex.com analyst's Eric Viloria believes "that a cut is likely and may weigh on the common currency in the week ahead. If the bank announces targeted policy to provide support for periphery, this would likely boost the EUR."
EUR heads towards the ends of April easing against most of its rivals, as over the past few weeks, market players have been listening ECB officials bluffing on the benefits of a rate cut, and pricing it in. Usually, the ECB's leaders like to prepare market for big movements, so the assumptions seem to be true.
However, as Investec Research Team pointed well in a today's article, "Angela Merkel came out fighting yesterday by stating that higher interest rates are better for Germany. Whether this was a pre-emptive measure to suggest that rates will ultimately rise again or a warning shot to Mario Draghi remains to be seen," So, to cut or not to cut?
"Odds are now to the downside in the pair, with a break below the 1.2970 Fibonacci level opening doors for a quick test of key 1.2880, strong static midterm support," points Bednarik. In addition, it seems that a bunch of stop orders and option barriers are below 1.2950. "Once below this last, the slide could easily extend towards 1.2740/50 area next week, but if this last gives up, then get ready for a run towards sub 1.26 level this May. "
To revert actual bearish tone, "price needs to establish above the 1.3115 resistance, 38.2% of the same Fibonacci rally, with scope then for a retest of 1.3200," continues the FXstreet.com analyst. "However, only steady gains above 1.3230, will provide basis for a bullish midterm case, with 1.3510 then at sight."
Finally, according to the FXstreet.com EUR/USD Banks, Brokers and Experts forecast pool, the short-term eurusd bias remains at 1.3000, as poll members forecast with low profile ahead of rate decisions
The EUR/USD closed its second negative week in row, extending declines from the 1-month high at 1.3200 reached on April 16. On the daily chart, the pair is slightly bearish according to the Fxstreet.com's trend index. Indicators such as CCI and Momentum are bearish while the Stochastic is neutral and the MACD is bullish.
"The EUR/USD has spent most of the last two weeks trading in a tight range, trapped in between Fibonacci levels," FXstreet.com's analyst Valeria Bednarik comments in a recent report. "After a non lasting test of 1.3200, the pair retraced all the way back to the 23.6% retracement of its latest daily fall from 1.3710 to 1.2744, around 1.2970."
The week ahead
Speaking about the days to come, as BK Asset Management's analyst Kathy Lien says it’s better to "strap on your seatbelts." Next week will have a bunch of volatility as key economic data are schedule across the world.
Market will be focusing mainly on the Fed and ECB meetings and the NFP report. Lien doesn't expect "much from the FOMC statement. Instead, non-farm payrolls will be the number to watch." The market consensus on NFP is about 160K new payrolls in April, well below 2012 average of 180K. In this line, Lien states that "the performance of the dollar could be mixed in the coming days depending upon how Chinese, U.K. and Australian data fare and whether the ECB cuts interest rates."
The UBS analyst team states that "with the latest indicators pointing to improving conditions, consensus expects a better payrolls report." Looking the March's figures at 88K new payrolls, the April's "nonfarm payrolls should increase by 145K and private by 170K, while the unemployment rate is expected to remain unchanged at 7.60%."
A reading below expectations, especially below 100K, would drive the USD lower. On the other said, a "job growth between 100K to 175K will be a relief for the Fed but probably won't inspire much optimism in the market," Says Lien. She believes that market needs to see a "job growth in excess of 200K" to fuel confidence.
The big bank week
With the recent economic data, it seems status quo in the United States will remain unchanged. "All talk of imminent QE downscaling can be forgotten for a while," as ING said in a report following the US Q1 GDP.
But the situation in Europe is kind different with Spain (27.2%), France (11.5%), Italy (11.6%), Greece (27.2%), Portugal (16.9%) and the whole Eurozone with 12% are in a desperate situation. Forex.com analyst's Eric Viloria believes "that a cut is likely and may weigh on the common currency in the week ahead. If the bank announces targeted policy to provide support for periphery, this would likely boost the EUR."
EUR heads towards the ends of April easing against most of its rivals, as over the past few weeks, market players have been listening ECB officials bluffing on the benefits of a rate cut, and pricing it in. Usually, the ECB's leaders like to prepare market for big movements, so the assumptions seem to be true.
However, as Investec Research Team pointed well in a today's article, "Angela Merkel came out fighting yesterday by stating that higher interest rates are better for Germany. Whether this was a pre-emptive measure to suggest that rates will ultimately rise again or a warning shot to Mario Draghi remains to be seen," So, to cut or not to cut?
"Odds are now to the downside in the pair, with a break below the 1.2970 Fibonacci level opening doors for a quick test of key 1.2880, strong static midterm support," points Bednarik. In addition, it seems that a bunch of stop orders and option barriers are below 1.2950. "Once below this last, the slide could easily extend towards 1.2740/50 area next week, but if this last gives up, then get ready for a run towards sub 1.26 level this May. "
To revert actual bearish tone, "price needs to establish above the 1.3115 resistance, 38.2% of the same Fibonacci rally, with scope then for a retest of 1.3200," continues the FXstreet.com analyst. "However, only steady gains above 1.3230, will provide basis for a bullish midterm case, with 1.3510 then at sight."
Finally, according to the FXstreet.com EUR/USD Banks, Brokers and Experts forecast pool, the short-term eurusd bias remains at 1.3000, as poll members forecast with low profile ahead of rate decisions