EUR/USD: Long For 1.0890, But Eyes On Draghi This Week

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GROWTHACES.COM Forex Trading Strategies

Taken Positions:

EUR/USD: long at 1.0730, target 1.0890, stop-loss 1.0730, risk factor ***

USD/JPY: short at 123.30, target 121.80, stop-loss 124.10, risk factor **

GBP/USD: long at 1.5050, target 1.5190, stop-loss 1.5050, risk factor ***

USD/CHF: short at 1.0050, target 0.9920, stop-loss 1.0070, risk factor ***

USD/CAD: short at 1.3305, target 1.3120, stop-loss 1.3325, risk factor **

AUD/USD: long at 0.7030, target 0.7190, stop-loss 0.6990, risk factor **

NZD/USD: long at 0.6520, target 0.6640, stop-loss 0.6480, risk factor **

Pending Orders:

EUR/CAD: sell at 1.4440, target 1.4180, stop-loss 1.4580, risk factor ***

CHF/JPY: sell at 123.70, target 120.20, stop-loss 124.70, risk factor **

AUD/NZD: buy at 1.0690, target 1.0990, stop-loss 1.0570, risk factor ***

EUR/USD: Long For 1.0890, But Eyes On Draghi This Week

(long at 1.0730)

• The EUR/USD is rising slightly as investors are taking profit on EUR-selling positions after robust US employment data on Friday prompted them to bet on an interest rate increase in December. Interest rates futures were pricing in a 70% probability that the US central bank will raise borrowing costs next month.

• San Francisco Federal Reserve Bank President John Williams said: “I do think it makes sense to gradually remove the policy of accommodation that helped get the economy to where we are.” Williams said he believes that factors holding inflation down, including weak oil prices and a strong dollar, should soon ebb and allow inflation to bounce back. In his opinion beginning rate hikes sooner than later would allow a smoother, more gradual process of policy normalization. The Fed will likely need to raise rates more slowly than the last time it tightened policy in 2004-2006, because of persistent headwinds holding back growth. Asked how slowly, Williams said investors could draw inferences from the Fed's quarterly economic projections.

• We got long at 1.0730 as we expect some EUR/USD recovery in the coming days. However, there is a risk that dovish Draghi on Wednesday will trigger another EUR/USD sell-off.

• In our opinion the risk of strong sell-off after Draghi’ speech is lower now, because investors should not be surprised as they were on October 22, when Draghi indicated that the ECB was seriously considering expanding its bond purchase programme and perhaps even lowering its already-negative deposit rate. Draghi’s dovishness may be also less explicit, as the EUR/USD is much lower now than it was on October 22.

• What is more, the Fed needs to communicate now that rate hike path will be gradual to stop the USD appreciation that may hurt the economy. Fed Chair Janet Yellen’s speech is scheduled for Thursday.

• In our opinion the EUR/USD recovery will be limited. The target of our long is 1.0890. Further strategy depends on the rhetoric of central bankers (Draghi, Yellen) later this week.

Significant technical analysis' levels:

Resistance: 1.0894 (high Nov 6), 1.0898 (high Nov 5), 1.0918 (10-day ema)

Support: 1.0705 (low Nov 6), 1.0666 (low Apr 23), 1.0660 (low Apr 21)

USD/CAD: Strong Candian Jobs Report Overshadowed By US Data

(short at 1.3305)

• Canada added 44.4k jobs in October, the biggest gain in five months, sending the unemployment rate down to 7.0% from 7.1%, as employment in the public administration sector jumped on hiring related to last month's election. The figures topped market expectations for a gain of 10k.

• Employment in the public administration sector increased by 32k positions in October, coinciding with temporary hiring related to the federal election.

• Still, hiring picked up in other sectors, including a 17.6k increase in trade, and a 12.9k gain in accommodation and food services.

• The overall job gains also came as the participation rate increased to 66.0% and brought the number of employed Canadians to over 18 million for the first time.

• But the natural resources sector, which has been hurt by the drop in commodity prices, continued to shed jobs with employment falling by 8k. Over the past 12 months, the industry has lost 25.6k jobs.

• The loonie weakend strongly against the USD on Friday, as the Canadian report was overshadowed by strong US non-farm payrolls. What is more the details of the Canadian report were not so rosy – more jobs were added in part-time than full-time employment and a lot of this growth was related to the election and may be unwound soon.

• Our medium-term view on the loonie is still constructive. In our opinion the Bank of Canada will not cut interest rates soon, especially when the Fed is tightening its policy. What is more, the CAD may get support from recovering oil prices as we expect over the medium term. We got USD/CAD short at 1.3305.

Significant technical analysis' levels:

Resistance: 1.3309 (76.4% of 1.3457-1.2832), 1.3318 (high Nov 6), 1.3331 (high Oct 1)

Support: 1.3177 (10-day ema), 1.3158 (low Nov 6), 1.3142 (low Nov 5)