Vang SJC

Yesterday (20/01), EUR/USD fell slightly even though disappointing US inflation data overshadowed the possibility of Federer Reserve rate hike. The currency pair moved in a broad range between $1.0877 and $1.0976, before settling at $1.0889, down 0.20% compared to the open price.

Fundamental Analysis

Fundamental Analysis

Unlike the financial crisis in 2008, the world is staggering due to the slowdown in China, the oil rout and the tightening cycle in US. The commodity market entered bearish territory with shorting activity peaking from the last month of 2015 to the beginning of 2016 and showed no sign of slowing.

This week, China’s central bank has injected the most amount of cash into the national financial system since 2012. The People’s Bank of China offered 400 billion yuan ($60.8 billion) worth of short-term loans, known as reverse-repurchase agreements, to commercial lenders via open-market operations, after 600 billion yuan of funds added into the banking system via short- and medium-term loans to help ease a liquidity expected before the Lunar New Year holiday in early February. In total, the central bank’s net cash injection for this week reached 315 billion yuan, the largest of its kind since mid-January 2012. However, China’s Shanghai Composite Index still fell 3.2% as the central bank’s attempts failed to ease concern that the economic slowdown will deepen, pulling Asian stock market back into volatility.

On commodity market, crude extended its rout to fall below $28 per barrel after brief rally at the end of yesterday session. Almost uninterrupted selloff in crude oil continue to drag most Asian markets into the red. The industry-funded American Petroleum Institute reported that U.S. oil stockpiles expanded by 4.6 million barrels last week, compared to 3.3 million barrel increase predicted by analysts ahead of data from the Energy Information Administration published today.

The European Central Bank meets today and investors await signals from President Mario Draghi on whether the worsening global outlook will prompt more easing measures. In fact, price growth in the euro area is considered to drop in the coming months, and Barclays forecasts that inflation will average just 0.1 percent in 2016. If the crude cannot stable, the ECB will have to lower its inflation forecast in March meeting as the record low inflation has no way to reach the target of 2% with a hovering-$30-level oil price. Since the last meeting, Euro has increased 3% against US dollar while oil has plunged 50%. This is an unexpected scenerio for ECB to boost price and 19-nation bloc economy. However, the center bank is expected to leave its interest rate unchanged, therefore the risk of monetary policy divergence has not pressured the currency pair.

Today, the center of the US market is Unemployment Claims reported by Department of Labor. Theoretically, this is the nation’s earliest economic data of labour market therefore it tends to be more focus on the release when traders need to diagnose recent developments, or when the reading is at extremes. Last week the data is expected to decreased by 5,000 to 279,000 compared to the earlier week end January 15th.

At the same time, Federal Reserve Bank of Philadelphia will report Philly Fed Manufacturing Index for January, calculated based on a survey of about 250 manufacturers in the Philadelphia Federal Reserve district which asks respondents to rate the relative level of general business conditions. Index above 0.0 indicates improving conditions and the figure is forecasted at -5.8 in the context of murky manufacturing sector in general.

Technical Analysis

Technical Analysis

Currently, at 16:52 GMT+7, the pair is trading at $1.08900, up slightly from the opening price of $ 1.08848.

Deriving from chart D1, ADX indicator (The Average Directional Index (ADX) measures trend strength without regard to trend direction while the other two indicators, Plus Directional Indicator (+DI) and Minus Directional Indicator (-DI), complement ADX by defining trend direction) is 20.9 which shows that the pair hasn’t confirmed the trend.

The Relative Strength Index (RSI) is at 51.2 indicating that there is no trend so we have to look for clearer direction in faster-react time frame.

jan 21 d1 tech

According to chart H4, the price has formed a ascending triangle as the buyers cannot seem to exceed the $1.09780 bar  However, they are gradually starting to push the price up as evident by the higher lows. Currently, the price has reached the lower bar and bounced back.

jan 21 h4 tech

Deriving the chart H1, the pair tested the 38.2 bar at $1.09146 in last session but fell to break through and pull back down to 50.0 level at $1.08937 and are hovering around this bar and likely to lower further to 61.8 support at $1.08725. However, the price may go up to 23.6 resistance, a strong level which has hold the pair from ticking up in previous sessions.

jan 21 h1 tech

The MUAEA Signal Trend Indicator has shown the Sell Signal since yesterday, giving us the rewards of approximately 40 points.

Sentiment Analysis

Sentiment Analysis

As we can see in chart H1, there are only 5 red candles compared to 8 green ones. The pair pared the loss in early Asian session and inched up in six consecutive candles. The bull pushed the price to test 38.2 level but closed lower this bar as the bear came in and pulled the market in red.

jan 21 h1 sentiment

Risk

Risk

Although there is not much possibility that ECB would lower its interest rate by 10 more basic point to -0.4%, president Mario Draghi is likely to say something dovish to pull the Euro down against its American counterpart to support the euro zone economy amid oil rout deter the recovery path of inflation.

Market commentary

jan 21 d1 final

Today, the pair is likely to close higher at $1.09300 as the ECB may wait for more incentive to deploy more stimulus measures and crude price has no support.

However, as mentioned in the Risk, the price may go down in the context of volatile stock market which unwind the investors’ position from riskier assets to safe-haven including US dollar.

Analyses of Group fiinvesting

Linh Nhan