EUR/USD has been falling for five days – and there is no end in sight. The world's most popular currency pair has been hit by developments on both sides of the Atlantic. Investors have been left unconvinced by Germany's baby steps to move toward stimulating the economy.
EUR/USD fell for the fifth straight trading day on Monday despite the uptick in the German bond yields. The currency pair dropped 0.10% on Monday, having registered 0.38%, 0.29%, 0.28% and 0.15% losses on Tuesday, Wednesday, Thursday, and Friday, respectively. That is the first five-day losing streak since mid-May. Back then, the pair had dropped for five straight days from May 13 to May 17.
24-hour view: “EUR traded between 1.1074 and 1.1113 yesterday, narrower than our expected sideway trading range of 1.1065/1.1115. While the slightly improved downward momentum could result in EUR dipping below last week’s 1.1065 low, a sustained decline below this level is unlikely (next support at 1.1040 followed by the major level of 1.1025). On the upside, 1.1115 remains as a strong resistance level (minor resistance is at 1.1100)”.
Imagine that you have in front of your eyes a bearish flag in the EURUSD, you feel that you must short immediately, but you do not feel confident in doing so, nor do you know how far the price can fall, these doubts abound among all traders when they see an opportunity to enter the market, fortunately here is the Elliott Wave theory it is not the holy grail but allows us to understand the complex price action to create a plan for the future. In the Elliott Wave count for this week of the EURUSD, we present a trading plan that serves to make high probability decisions.
Markets remain calm as the wait toward Fed Chair Jerome Powell's speech on Friday continues. President Donald Trump called the Fed to slash rates by 100bp and introduce QE, while Boston Fed President Eric Rosengren wants to wait and see. China marginally weakened the yuan – within expectations. Hong Kong leader Carrie Lam offered protesters a national dialogue as tensions wane.
The shared currency has remained under selling pressure on Friday, amid mounting speculation the ECB will announce a larger-than-anticipated stimulus package next September. Despite the market’s mood improved and that US data was generally disappointing, the EUR/USD pair finished the week below 1.1100. In June, Housing Starts fell by 4.0%, missing the market’s forecast of -1.7%, although Building Permits rose by 8.4%.
Latest News & Analysis EURUSD
EUR/USD gained 0.19% on Wednesday, snapping a five-day losing streak, however, the outlook remains bearish as the pair is trading well below the former support-turned-resistance of 1.1162 (Aug. 12 low).
GBP/USD is flirting with the inverse head-and-shoulders neckline resistance of 1.2165 at press time. An inverse head-and-shoulders is a bullish reversal pattern and its success rate is high when it appears after a notable sell-off.
The Fed policy that switched to neutral in Jan completed the circle last month with first decrease in the base rate in more than a decade from a 2.50% upper target to 2.25%. Markets expect a second cut at the September 18th FOMC.
Following its successful bounce off 10-day exponential moving average (EMA), Gold takes the bids to $1507 during the early Asian session on Wednesday. The yellow metal now heads to Friday’s high around $1528 ahead of questioning the monthly top surrounding $1535.
Following a temporary reversal seen on Tuesday, the USD/JPY pair resume the bullish momentum in Wednesday's Asian trading and tests the 106.50 level, tracking the gains in the US Treasury yields and S&P 500 futures.
THEMES AFFECTING THE EUR/USD
SPECIAL YEARLY FORECAST
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.
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.