Last Week’s disappointing US NFP and unemployment print became the underlying reason for the single currency to re-bounce from weeks of consecutive decline against the greenback. Unlike last week, this week volatility focus will be shifted from the greenback and back onto the single currency with the market anticipating Mario Drgahi’s rhetorical during Tuesday’s ECB press conference. In addition to that the US ISM Non-Manufacturing PMI will determine whether last week’s greenback rally can be sustained. Technical Commentary After two trading weeks of bearish decline, the EUR/USD market managed to catch a break and re-bounce from the 1.3380 level to the 1.3430 level on the back of a disappointing US Non farm payroll print and the degradation in the expectation of a rate hike by the Fed. What this entailed is that this re-bounce has allowed the Euro to rally from the 61.8% Fibonacci expansion marked by the 1.33950 level to trading slightly below the 50% expansion at 1.3454. In accordance to the SSI which is commonly known as the speculative sentiment index, recent EUR/USD multi-weeks low had given retail traders the opportunity to pile onto long EUR/USD positions. Analyst would suggest taking the contrarian stand point to this crowd sentiment and expects further weakness in the single currency. At current price action, retail trader’s EUR/USD long interest sits at a ratio of 2 to 1 short interest outstanding. The next support tier that analysts are monitoring is the 1.33 mark established by the November low and failure to sustain trading momentum above this level will expose the pair to the 1.31 level marked by the September peak. Analysis of a collection of technical indicators on the hourly time interval on the EUR/USD cross is suggestive of a temporary bullish market sentiment and recommends long positions on the Single Currency. The EUR/USD cross opens today’s Sydney trading session inching closer to the established Fibonacci support at 1.3421 while the Fibonacci Resistance is set at 1.3429. Since last week’s EUR/USD rally, the pair briefly broke above the 200 Days SMA in the process, however this trading momentum was not sustained causing the single currency to trade below the 200 Days SMA once again. Since the EUR/USD cross, opened today’s trading session below the 200 Days, this is very indicative of a long term bearish outlook on the cross moving forward. This bearish stand point is not validated on the short term moving average front as the pair opens today’s trading session above the 5,10 but below the 20 and 30 Days SMA which is indicative of a hold recommendation on the moving average front Fundamental Commentary Without a doubt, last week’s EUR/USD market has been tainted with a shift in market’s sentiment that favours the greenback on the back of rising US treasuries yield coupled with a brief spark in risk aversion. This loss of risk appetite by investors was very reflective in the sell off in the equity market during last week’s trading session. Last friday’s trading session was the climax of last week’s risk events, investor entered into last Friday’s trading session with a weaker than expected German Manufacturing PMI ticking in at 52.4 below forecast of a 52.9. However the predominant tier-1 market moving piece of data was the US employment report. The US Non-farm payroll print came in softer that what the market has been anticipating at 209,000 jobs when the market expects a 233,000 jobs reading. In addition to that US unemployment rose from 6.1% to 6.2% with the average US hourly earnings flatten when expectation expected a 0.2% expansion. In response to the disappointing US employment report, Long term treasuries yield curve fell as the market reprice their expectation that the Fed will become more reluctant to engineer an exit strategy. The Fed’s QE tapering program will come into completion by October and when September comes, the markets were expecting an exit strategy by then, however post the NFP report most likely will the Fed remain accommodative until economic conditions improved. The last piece of positive economic data out from the US last week was the ISM manufacturing PMI which beat expectation by coming in at 57.1 when expectation was at 56. Heading into this week trading session, post-NFP the only volatile piece of report that can affect the greenback price action is Tuesday’s US ISM Non-Manufacturing PMI forecast to read at 56.3 while the ISM Non-Manufacturing employment component is expected to expand at 54.40. Over in the Euro-Zone, the market can expect a string of tier 1 leading economic report heading into this week’s trading session. On Tuesday the German will release its Service PMI print forecast to come in at 56.6 while the whole Euro-Zone PMI is expected to tick in at 54.40. In addition to that Euro-Zone Retail Sales MoM is forecast to read at 0.4%. Meanwhile on Thursday the German will release their industrial Production MoM print forecast to expand by 1.3%. The biggest highlight for this week’s risk event is the ECB press conference and interest rate decision with the Euro-Zone benchmark rate is expected to remain unchanged at 0.15%. Never-the-less volatility will certainty stem from Mario Draghi’s rhetorical and with the understanding that deflationary pressure will continued to be the Euro-Zone biggest challenge, the bank’s rhetorical will most likely lean towards dovish with additional plan of action for the implementation of further stimulus packages.
Posted on: Mon, 04 Aug 2014 01:13:26 +0000
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