Euro Could Return To 1.0930

Yesterday’s Trading:

The euro/dollar on Thursday formed a spike. The strengthening of the euro to 1.0942 was caused by Reuters and a fall in European stock indices. Reuters relayed that the majority of ECB representatives are against a further loosening of monetary policy and at that moment the stock indices were trading down by 2-3%.

In the second half of the day the euro weakened against the dollar due to a rise in oil prices, a rise in US stock indices and a fall in the euro/pound cross after the BoE convened.

Brent was up to $31.16 per barrel. The Bank of England kept its interest rate at 0.5% and its asset purchasing program at 375 billion GBP. The indices were up by about 1.5%.

The number of initial unemployment benefit applications in the US for the week was up from 277k to 284k.

Main news of the day (EET):

12:00, Eurozone November balance of trade;

15:30, US December retail sales, manufacturing activity index from NY Fed for January, December PMI;

16:00, FOMC member Dudley to speak;

16:15, US industrial manufacturing data for December;

17:00, Reuters/Michigan consumer confidence index for December.

Market Expectations:

Trader attention on Friday will be on stock indices’ movements, in addition to US fundamental data. The Japanese Nikkei 225 and the Shanghai Composite are trading in the red zone. Oil is down slightly.

If the European indices head down following Asia, the euro will strengthen against the dollar to 1.0909. In my forecast I’ve gone for a sideways until US trading and then a growth of the euro. Monday is Martin Luther King Day in the US, so the stock indices will be able to take a break and this will give the euro room to rise.

Technical Analysis:

Intraday target maximum: 1.0915/30, minimum: 1.0854 (current Asian), close: 1.0895/1.0900;

Intraday volatility for last 10 weeks: 100 points (4 figures).

The euro/dollar has corrected by 45 degrees (Gann levels) from a minimum of 1.0834. I expect it to close up today. The reason for the euro’s strengthening is written above. It would be decent if the pair can stick out the American session near the balance line (55 average). I expect to see a rise from here to about 1.0915/30.