Below a chart showing key support and resistance levels and buying and selling activity from our dedicated contributors. Our aim is to offer you the technical and fundamental context and underlying sentiment towards the EUR/USD.
How is EUR/USD performing?
- Legitimating the supply-demand distribution from our dedicated contributors (see above chart or click here for details) 1.0650 is likely is the likely draw today: DTCC highlights 3.2bln 1.0650 options expiry NY cut. O/n Options 16.0 or 71 pips break even. 1bln 1.0625-35 expiries today (Reuters) [Updated 01/19 12:01 CET];
- In case market participants have to readjust their expectations of a hawkish Draghi, triggering further gains in the EUR/USD, these would meet a selling opportunity around and above 1.0744 which is todays R2 (see more Pivot Points) and was also ytd's R2. The proximity of round figure 1.0750 makes it a good place for a short scalper to get positioned [Updated 01/19 11:11 CET];
- There are surely arguments in favor of a weaker EURUSD post ECB meeting: "...it is likely that President Draghi will maintain a cautious tone stressing that there has been little evidence of pick up in core inflation pressures yet." Lee Hardman, Currency Analyst at MUFG [Updated 01/19 10:33 CET];
EURUSD 2017 YEARLY FORECAST
EUR/USD SENTIMENT IN THE FOREX MARKET
Bearish for the Euro
ECB will be the primary focus for Euro traders. I am always in expecting the unexpected mode when it comes to the ECB decisions. However, there’s unlikely to be any significant policy change that will cause investor panic nor the Euro to rocket higher. Keep in mind the recent EUR strength is more about the broader USD correction rather than any positivity in Europe."
Bullish for the Euro
Last month, Draghi acknowledged that deflation forces were almost vanquished. He can extend this analysis a little, but it may not yet be time to change the balance of the outlook quite yet. Still, there may be scope for another type of concession to the more hawkish contingent: the reference that rates will remain low or lower can be modified to suggest less risk of a lower rates.
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 of Euro Dollar 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, the EUR/USD 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 data has the ability to either reinforce an existing trend or reverse it depending on by how much it missed or beat expectations. By 5:00 GMT liquidity leaves the market once again as European traders close out positions and head home.
Most influential institutions for the EUR/USD
The Euro US Dollar can be seriously affected by the decisions taken by two main central banks:
The European Central Bank (ECB)
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.
The Federal Reserve Bank (Fed)
On the other hand we found The Federal Reserve System (Fed) wich is the central banking system of the United States. Fed has two main targets: to keep unemployment rate to their lowest possible levels and inflation around 2%. The Federal Reserve System's structure is composed of the presidentially appointed Board of Governors, partially presidentially appointed Federal Open Market Committee (FOMC). The FOMC organizes 8 meetings in a year and reviews economic and financial conditions. Also determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth.
Most influential people for the EUR/USD
Considering that the ECB and the Fed are the most influential institutions for the Euro US Dollar, it makes sense that its presidents, Mario Draghi and Janet Yellen respectively, are the authorities with bigger effect on the currency pair. Their speeches, statements and wording are closely watched to see any signal of next potential move in the pair.
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.
Janet L. Yellen (born August 13, 1946) took office as Chair of the Board of Governors of the Federal Reserve System (Fed) on February 3, 2014, for a four-year term ending February 3, 2018. She had already previously served as a Vice Chair from 2010 to 2014. This American economist also serves as Chairman of the Federal Open Market Committee (FOMC), the System's principal monetary policymaking body. Her declarations are also an important source of volatility, especially for the US Dollar and the currencies traded against it.
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. This group also includes EUR/USD, GBP/USD, AUD/USD, USD/CHF, NZD/USD and USD/CAD. 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.