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The year of the rooster has begun with a fall for the euro against USD and GBP. Over the course of two days the euro/dollar fell 185 points. After the publication of positive US data, the price fell to 1.0341, from which a new phase of revival began. In 34 hours the pair rose 200 points to 1.0540.

Market participants reacted rather lightly to the Fed protocol. All committee members voted for a tightening of monetary policy. The Fed chiefs noted significant uncertainty regarding Trump’s effect on the economy. Due to this, the regulator is to wait and see what happens when Trump takes office and then maybe make a change to the interest rates. Trump’s inauguration is set for 20th January, 2017.

The next of the regulator’s meetings is set for 31st January – 1st February. According to the latest data from CME Group FedWatch Tool, the likelihood of a rate rise at this session is just 2%.

Market expectations:

During Asian trading the euro/dollar rose to 1.0540. Now the market participants have their sights set on Friday’s NFP (Non-Farm Payrolls). The euro is strengthening to look like a complex wave formation. This means that after the update of the maximum, we should expect a sharp U-turn downwards.

As a support we have the trend line and the 45th degree. A break in the trend will cancel out my scenario for an update of the maximum. I reckon that the euro could reach the 1.0560/65 area. From here it will start to prepare for the payrolls.

Day’s news (GMT+3):

  • 11:15, Swiss December CPI;
  • 12:10, Eurozone, December retail trade and business activity index;
  • 12:30, UK December business activity index for the service sector;
  • 13:00, Eurozone November PMI;
  • 15:30, ECB’s assessment of economic conditions, US planned dismissals from Challenger for December;
  • 16:00, BoE’s Haldane to speak;
  • 16:15, US December changes in employment (excluding in agriculture) according to the ADP;
  • 16:30, Canadian November index for natural resource prices for manufacturers and industrial goods index for November, US initial unemployment benefit applications;
  • 17:45, definitive US data for business activity in the service sector for December;
  • 18:00, US index for non-manufacturing business activity from ISM for December;
  • 19:00, US changes in oil reserves from the Ministry for Energy.

Technical analysis:

Euro/ rate on the hourly. Source: TradingView dollar

Intraday forecast: minimum: 1.0481 (current Asian), maximum 1.0563, close: 1.0514.

Before new year the buyers chased the price up into the heavens on the thin market: above the U3. On 3rdJanuary the sellers dragged it back down to earth and below. Volatility on the market remains high.

The euro in Asia has lifted to 1.0540. The strengthening of the currency stopped around 180 degrees and the U3 line. The MA line U3 is a strong resistance, so I don’t reckon we’ll see a growth above 1.0565 today. After a renewal of the maximum, market participants are beginning to prepare for Friday’s payrolls. Taking the complex wave structure from a minimum of 1.0390 into account, after a renewal of the maximum, a drop to 1.0478 (in Asia on 6th January) is expected. A break in the trend line will cancel out any scenario for growth.

For me, a break in the line is a close of the hourly candle below the line. If the next candle again closes above the line, then we’re talking about a false break and the line corrects according to the last minimum.

 

source - http://alpari.com/en/analytics/reviews/market_sessions/17601_05012017/

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