Euro/Dollar: Euro Expected to Rise to 1.0900

EURUSD 1H

Yesterday’s Trading:

The European trades on Thursday saw the euro/dollar head from 1.0866 to 1.0921 after the ECB had convened. The euro/dollar fell 148 points during Draghi’s speech to 1.0773.

The ECB left rates unchanged and Draghi announced that negative risks to the economy are on the rise. Due to falling oil prices, inflation will remain low for a long time and could drop further. The regulator is ready to introduce more measures to stimulate the economy. Some experts expect the ECB to drop interest rates for deposits in March.

The EUR/USD reacted negatively to the ECB announcement, but was able to restore to 1.0900 due to the dollar falling after the US Ministry for Energy published a report and a growth of oil quotes. The report was negative and oil went up. Why oil reacted to the report by rising in price is an absolute mystery to me. The informational agencies write that the reason was Venezuela calling on OPEC member states to hold an unplanned meeting to discuss oil prices. The Venezuelan oil minister has asked Ecuador, Algeria and Russia to help organise the meeting.

Main news of the day (EET):

• 10:30, German business activity in the manufacturing sector and service sector for January;

• 11:00, Eurozone business activity index manufacturing sector and service sector for January;

• 11:30, UK retail sales;

• 15:30, Canadian retail sales and CPI;

• 16:45, US business activity index manufacturing sector;

• 17:00, US December retail sales in the secondary housing market.

Market Expectations:

Almost all of the Asian stock indices are trading up, but the Chinese ones are down slightly. The euro/dollar is down. Trader attention on Friday will be on the publication of preliminary values for business activity in different regions. In the US, traders will be watching and waiting for the publication of the big business’ financial reporting in the country. For Friday I have the euro rising to 1.0895/1.0900.

Technical Analysis:

• Intraday target maximum: 1.0900, minimum: 1.0829, close: 1.0855;

• Intraday volatility for last 10 weeks: 100 points (4 figures).

Draghi has weakened the euro bulls but they are still strong due to the fall of the stock indices. If the euro falls below 1.0775, we could once again be aiming for 1.0650. I expect to see the euro strengthen on Friday since the hourly indicators for the euro/dollar and euro/pound are indicating growth.

EURGBP 1H

The euro/pound fell to the D3 during Draghi’s speech. The AO indicator is turning downside up. A euro buy signal has formed on the stochastic. If I am right, the euro/pound will return to the LB, thereby strengthening the euro’s position against the dollar.

Daily

Wednesday’s pinbar was worked off during Draghi’s press conference. The price bounced from the trend line. The bear mood remains, but keep an eye on the stock indices. Their fall will return the market to the buyers.

Weekly

The euro dollar has been trading in a sideways trend for six weeks. The buyers’ and sellers’ strength is equal. If we take the indicators and Draghi’s words into account, the sellers should have the advantage.