Euro/Dollar: Market Waiting for ECB outcome & Draghi Press Conference

Hourly

Yesterday’s Trading:

Volatility on the currency market on Wednesday was very high. The euro and pound updated new minimums against the USD. The rates were down due to weak UK (construction PMI) and Eurozone (CPI) data. The Swiss franc strengthened against the dollar with participants trying to avoid riskier currencies.

Support for the dollar came from a US labour market report during the American session. The data from Automatic Data Processing Inc. (ADP) showed a November growth in private sector employment of 217,000 as opposed to the 196,000 growth in October (reassessed from 182,000 and forecasted at 190,000). The indicator exceeded market expectations.

The euro/dollar dropped from 1.0636 by 67 degrees to 1.0550. After trades closed in Europe, the rate restored by those very same 67 degrees to 1.0626

Main news of the day (EET):

• 10:15 to 11:00, EU service sector PMIs;
  

• 12:00, Eurozone October retail sales;

• 14:45, ECB interest rate decision;

• 15:30, ECB press conference with Mario Draghi. US initial unemployment benefit applications;

• 17:00, ISM’s November service sector business activity and October manufacturing orders;

• 17:00, Fed’s Yellen to speak.

Market Expectations:

The euro/dollar was trading around the LB. Today’s ECB meeting is the focal point for traders. The outcome of the meeting is expected to be a further relaxation of monetary policy in the form of lowered rates for deposits and a widening of QE. The US NFP is out on Friday.

Yesterday Yellen announced that there shouldn’t be any dragging out of putting rates up. The market is already trying to get a head of a rate rise by the US Fed on 16th December. If the NFP comes out worse than expected by 20-30k, we could see all currencies strengthen against the dollar at the end of the week.

Technical Analysis:

• Intraday target maximum: n/a, minimum: n/a, close: n/a;

• Intraday volatility for last 10 weeks: 103 points (4 figures).

The current rate of the euro is 1.0593. My forecast is for up to 14:45 EET. I don’t see any point in guessing what will be the outcome of the ECB meeting and what Draghi will say at his press conference. I said yesterday that it’s better to stay off the market until Monday so as not to get caught up in swings in both directions whilst there’s fundamental news coming out.

Daily

Despite the inversion upwards of the stochastic and CCI, the euro/dollar has updated its minimum before the ECB meeting. There’s a support at 1.0550. Now take a look at the daily graph. A hammer has formed. It’s an inverted candle, but there’s no point relying on it for now. Draghi could break up any strong technical and graph signals with his words. Now to the Weekly.

Weekly

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