Yesterday (25/01), EUR/USD moved upward in a session without volatility as investors awaited for the first meeting of the new year of Federal Open Market Committee which is scheduled today. The currency pair moved between $1.07817 and $1.08557, before settling at $1.08481, up 0.54% compared to the opening price of $1.07901.
Stocks around the world slumped today as oil fell back below $30/barrel. The decline in crude price is considered to be the signal of slower global growth and weakness in emerging-markets and triggers the concern about negatively unexpected inflation. The divergence in central banks’ policy in last year has been overwhelmed by the fear that both US and eurozone inflation is ticking down instead of moving toward the target goal of 2%.
From last December, when both central banks had to protect their credit after months of commentary and manipulating the economy by words, and deployed some kind of dissapointed-than-expected policies, the S&P 500 stock index has fallen 9.5%, oil prices down 16% while the VIX index, which measures the volatility of S&P 500 increased by 28%. Even the labour market has flourished in both eurozone and US, the two economy still have to suffer headwinds from emerging market which weaken the global demand and send commodities in the most terrible territory in the last few years.
In the first meeting of 2016 last week, the European Centre Bank President Mario Draghi signaled that his central bank would have to cut interest rates and expand its quantitative easing programme as soon as March if the current conditions of China’s slowdown and the crash in crude oil have no sign of recovery. The ECB expects that the additional measures will lift eurozone inflation, which has been below 1% for more than two years now, from its current 0.2% towards its target inflation.
Investors will remain cautious ahead of Fed’s policy meeting due to begin today. The central bank is expected to keep its interest rate on hold and slow the path amid global financial market turmoil. The probability of a second interest rate implied by Fed fund futures is lowest since last October while the CME Group’s FedWatch tool which gauges the market’s expectations of a change to the Fed Funds target rate is at 11%.
Today, Conference Board will report the Consumer Confidence which is forecasted to reach 96.6 point. One reason for expecting that today’s release will look pretty good is that the figures of UoM Consumer Sentiment index ticked higher in January.
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.
From chart H4, we can see that the price has been moving in a quite narrow range between $1.07897 and $1.09826. In the beginning of this session, the pair reached the lower bar which supported the common currency in at least 4 sessions. The price is reaching the upper bar and it’s hard to go beyond this level.
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 35.89, indicating that the current trend is confirmed.
The MUAEA Signal Trend Indicator has shown the Buy Signal since yesterday, giving us the rewards of approximately 213 points.
Today, the price is likely to close in red at about $1.08000 as the data from US market is expected to beat expectation.
However, the pair can go up to $1.08800 if the Fed says something dovish which can support the euro and push the pair up.
Analysis of Group Fiinvesting