Vang SJC

Yesterday (21/01), EUR / USD pared sharp losses to close slightly lower, after tumbling early in the U.S. session amid dovish signals from European Central Bank president Mario Draghi that further stimulus measures could be implemented before the end of the first quarter. The currency pair traded in a broad range between 1.0778 and 1.0992, before settling at 1.0867, down 0.22% on the session.

Fundamental Analysis

Fundamental Analysis

The world once again pays attention to global monetary policy amid signs that central banks may deploy more stimulus measures to booster an economy which is drowned in China’s slowdown and oil’s crash.

Yesterday, the ECB’s Governing Council left its deposit rate unchanged at minus 0.3%, after cutting it into negative territory by 10 basis points in last meeting. However, ECB’s President Mario Draghi practically promised that the central bank will not only review, but also introduce additional easing at its next meeting on March 10 to support the economy. The potential for an expansion in central bank stimulus sparked a surge in shares and crude oil inched toward $30 a barrel and unwind investors’ position from haven assets.

Oil extended its gain toward $30 a barrel, rising 0.3% to $29.62 a barrel on the NYMEX (New York Mercantile Exchange). Ric Spooner, a chief analyst at CMC Markets in Sydney, said “After large directional movements like those we’ve seen over recent weeks, there tends to be corrective move in the opposite direction” for oil.

In US, the Labor Department said Initial claims for state unemployment benefits increased 10,000 to 293,000 for the week ended Jan. 16, the highest reading since early July. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 6,500 to 285,000 last week, the highest reading since mid-April.

While layoffs have picked up in recent weeks, the increases might not suggest a material weakening in labor market conditions as data have been below the 300,000 mark for 46 straight weeks, the longest streak since the early 1970s.

Outside the energy, mining and manufacturing sectors, which have been devastated by a slump in crude oil prices and a robust USD, layoffs have been generally low as the labor market approaches full employment. The economy is struggling with the headwinds of the strong dollar, slowing global demand and relentless spending cuts in the energy sector, which have pressured manufacturing.

In a separate report, the Philadelphia Federal Reserve said its general activity index rose to -3.5 this month from a reading of -10.2 in December. The index has now been negative for five consecutive months. The new orders index remained negative, but increased 10 points to -1.4, while the shipments index increased 12 points, its first positive reading in four months. Inventories at factories in the region continued to decline and firms also reported a drop in the backlog of unfilled orders and shorter delivery times.

Today, the market will focus on the Markit’s Flash Manufacturing PMI expected to decline slightly to 51 from last month’s 51.3. he most widely followed survey index is the ISM’s manufacturing survey, and it has already been below 50 since November – indicating contracting manufacturing activity.

Technical Analysis

Technical Analysis

Currently, at 15:12 GMT+7, the pair is trading at $1.08329, down 0.35% from the opening price of $ 1.08714.

Deriving from chart D1, the currency pair has been in down trend for more than a month with lower highs and lower lows. Lately, the price has tested the upper line many times but failed to make any breakout and has to move back into the trend. Fibonacci retracement shows that Euro is moving toward the 23.6 bar at $1.07445 against the US dollar.

jan 22 d1 tech

From chart H4, we can see that the price has been moving in a quite narrow range between $1.08027 and $1.09847. The pair is reaching the lower bar which supported the common currency in at least 4 sessions. Therefore, today, the price may not close under this level and we hope to see a slight bouncing once the pair hovers there.

jan 22 h4 tech

From chart H1, we can see more evidence of moving down as according to ADX indicator (The Average Directional Index), the Minus Directional Indicator -DI (the white line) is above the Plus Directional Indicator +DI (the yellow line) and ADX is above both +DI and -DI. The ADX is at 41.24, indicating that the current trend is confirmed.

Another indicator which is RSI (Relative Strength Index) also supports the signal of downtrend when it is hovering the 30 line and like ly to rebound if it move into the oversold territory.

jan 22 h1 tech

The MUAEA Signal Trend Indicator has shown the Sell Signal since yesterday, giving us the rewards of approximately 623 points.

Sentiment Analysis

Sentiment Analysis

The EUR / USD pair has plunged violently since the beginning of Asian session with 10 red candles while the green ones closed near the openning price, showing that the bull managed to came in but failed to start an up trend. The last candle is in doji form with long shadow and narrow body showing that the trend may reverse, especially when the european session starts and the demand for euro hikes.

jan 22 h1 sentiment

Risk

Risks

US manufacturing has deepened in gloomy condition and dropped into the worst situation in the last 3 years. Today’s reading seems to get worse in the context of crude crashing which has resulted in investment outflow from energy sector. Existing home sales is likely to be under expectation cause the market appears to “reach the limit” as house price surged and investments drained. The weaker-than-expected data may support the pair go up.

Market commentary

jan 22 d1 final

Today, the EUR / USD pair may go down as the pressure from the President of ECB that more quantitive easing will be deployed as soon as the March meeting, which makes the pair moves higher when the US dollar is supported.

However, as mentioned in the Risk, the currency pair could go higher if the data from US is not in line with expectations.

Analysis of Group Fiinvesting

Linh Nhan