Two things dominated the financial world this 2018: political turmoil and fears of slowing economic growth. The first was quite foreseeable with Brexit and Trump´s victory in the US but the second dawned on markets like a cold shower in the second half of the year. It was not far ago when EU's growth hit record highs, according to Markit, with business activity shrinking to its lowest pace of growth in over four years in December.
EUR/USD: Trade optimism could bode well for EUR, focus on Tuesday's close
Essentially, EUR/USD created a long-legged doji candle, which is widely considered a sign of bearish exhaustion/indecision. A bullish trend reversal, however, would be confirmed only if the spot closes tomorrow above 1.1307 (high of Friday's doji candle).
EUR/USD latest news
EUR/USD latest analysis
SPECIAL YEARLY FORECAST
1. Technical Overview
The pair tried but failed to surpass the 23.6% retracement of its latest daily slump measured between 1.1513 and the mentioned yearly low at 1.1300, the immediate resistance. The daily chart shows that the bearish trend is firmly in place, as the price is below all of its moving averages which maintain strong downward slopes, while the Momentum indicator heads lower in negative levels and at its lowest for this year, and the RSI lacks directional strength, consolidating around 41.
Support levels: 1.1250 1.1215 1.1170
Resistance levels: 1.1300 1.1345 1.1375
EUR/USD PRICE SENTIMENT
EUR/USD BULLISH PERCENTAGE INDEX
EUR/USD Pivot points
EUR/USD trading positions
2. Fundamental Overview
The dollar rose early Friday, leading the pair to a fresh 2019 low of 1.1233 later easing amid up roaring equities and easing government bond yields, a sign of improved market's sentiment. The better market mood came by the hand of US President Trump, who said that the US is closer than ever to reach a deal with China. He also declared a National Emergency on the border with Mexico and signed a congressional bill to avert another government shutdown.
But the dollar's weakness had another reason: there were a couple of macroeconomic releases that really disappointed triggering an alarm on those interested in the greenback. Not only Retail Sales posted their largest decline in roughly a decade, but according to Friday releases, Industrial Production fell by 0.6% in January, and Capacity Utilization shrank to 78.2% from 78.8% previously. On a bright note, the preliminary Michigan Consumer Sentiment Index for February came in at 95.5, beating expectations and well above the previous 91.2. This Monday the US will be on holiday while there are no data scheduled in Europe.
EURUSD FUNDAMENTALS TODAY
Gold is fast closing on a year-to-date high of $1,326 reached on Jan. 31 and may break higher toward $1,354 (100-month moving average) if trade optimism continues to hurt the US dollar.
3. Big Picture
Themes affecting the EUR/USD
Influential Institutions & People for the EUR/USD
The Euro US Dollar can be seriously affected by news or the decisions taken by two main central banks:
The European Central Bank (ECB) is the central bank empowered to manage monetary policy for the Eurozone and maintain price stability, so that the euro’s purchasing power is not eroded by inflation. The ECB aims to ensure that the year-on-year increase in consumer prices is less than, but close to 2% over the medium term. Another of its tasks is the one of controlling the money supply. The European Central Bank’s work is organized via the following decision-making bodies: the Executive Board, the Governing Council and the General Council. Mario Draghi, member of the Executive Board, is also the President of this organism.
On the other
Mario Draghi is member of ECB's Executive Board and also the President of this organism. His declarations are an important source of volatility, especially for the Euro and the currencies traded against it. Born in 1947 in Rome, Italy, he graduated of the Massachusetts Institute of Technology and became President of the European Central Bank in 2011. Draghi gives press conferences in the back of how the ECB observes the current European economy. His comments may determine positive or negative trends for the Euro in the short-term. Usually, a hawkish outlook is seen as positive/bullish for the EUR, while a dovish one is seen as negative/bearish.
Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. His term as a member of the Board of Governors will expire January 31, 2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.
ECB NEWS & ANALYSIS
FED NEWS & ANALYSIS
The EUR/USD (or Euro Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs in the world. This group also includes the following currency pairs: GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. The popularity is due to the fact that it gathers two main economies: the European and American (from United States of America) ones. This is a widely traded currency pair where the Euro is the base currency and the US Dollar is the counter currency. Since the EUR/USD pair consists of more than half of all the trading volume worldwide in the Forex Market, it is almost impossible for a gap to appear, let alone a consequent breakaway gap in the opposite direction.
Normally, it is very quiet during the Asian session because economic data that affects the fundamentals of those currencies is released in either the European or U.S. session. Once traders in Europe get to their desks a flurry of activity hits the tape as they start filling customer orders and jockey for positions. At noon activity slows down as traders step out for lunch and then picks back up again as the U.S. comes online. If there is important U.S. data we can expect quiet markets just ahead of the number. U.S. economic news have the ability to either reinforce an existing trend or reverse it depending on by how much it missed or beat expectations with the EUR/USD news. By 5:00 GMT liquidity leaves the market once again as European traders close out positions and head home.
The GBP/USD (or Pound Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs worldwide. This group also includes the following currency pairs: EUR/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. The pair is also called 'The Cable', reffering to the first Transatlantic cable that was crossing the Atlantic Ocean in order to connect Great Britain with the United States of America. This term was originated in the mid-19th century and it makes GBP/USD one of the oldest currency pairs in the world.
The popularity of the Pound Dollar is due to the fact that represents two strong economies: British and American (from United States of America). The Cable is a widely observed and traded currency pair where the Pound is the base currency and the US Dollar is the counter currency. After the result of the Brexit referendum, where the majority of the British voted to abandon the European Union, GBP/USD has been suffering some turbulence in the Forex market as a consequence of the associated risks of leaving the single market.
The USD/JPY (or US Dollar Japanese Yen) currency pair is one of the 'Majors', the most important pairs in the world. Japanese Yen has a low interest rate, normally used in carry trades, that's why is one of the most trades currencies worldwide. In the USD/JPY the US Dollar is the base currency and the Japanese Yen is the counter currency. The pair represents American (from United States of America) and Japanese economies.
Trading the USD/JPY currency pair is also known as trading the "ninja" or the "gopher", although this last name is more frequently used when reffered to the GBP/JPY currency pair. The US Dollar Japanese Yen usually has a positive correlation with the following two pairs: USD/CHF and USD/CAD. The nature of this correlation is dued to the fact that both currency pairs also use the US Dollar as the base currency, such as USD/JPY. The value of the pair tends to be affected when the two main central banks of each country, the Bank of Japan (BoJ) and the Federal Reserve Bank (Fed), face serious interest rate differential.