We came back from the holidays full of energy for the year ahead, first of all we wish you a wonderful new 2014, full of success and good trades. Same like us, investors are also coming back from their holidays and this can be seen in the rising volume and the lower volatility from the Foreign exchange market.
Around NYE, it seems that the low volume made possible for the FX instruments, especially EUR/USD to have some interesting moves:
Let us start with the most traded currency pare, which we mentioned earlier EURUSD. It closed on 2013 under 1.3800 and this meant that bears still have some fighting power left. During the first trading days it dropped all the way to 1.3600 and this week dropped even lower, hitting 1.3572.
Today there were some interesting publications in the economic calendar. The German Prelim CPI was in line with the expectations, 0.4% rise, Spanish Services PMI rose the a 6 year peak, 54.2, Italian Services PMI slightly rose to 47.9 from last month’s 47.2 and the Europe Sentix Investor Confidence rose the most in the past 3 years, hitting 11.9.
The United States reported today the ISM Non-Manufacturing at 53.0, lower with 0.3 points from las month, and the Factory Orders up 1.8%, which was in line with the expectations.
From these publications investors bought the Euro today and send it 0.33% higher from the Friday close.
Up next in the FX Calendar there will be some very interesting and important events. Starting tomorrow Germany will publish the Retail Sales, Unemployment Change, Factory orders and the Constitutional Court Ruling and the Industrial Production. But this is only the beginning because the most important events are on Wednesday the US ADP Non-Farm Payrolls and the FOMC Meeting Minutes, on Thursday the ECB will publish its Minimum Bid Rate and will held the monetary policy conference and the USA will release the Unemployment Claims. Investors are really interested in what will the Non-Farm Payrolls and Unemployment Rate from Friday will look like, after Fed has tapered the QE with 10 billion dollars.
From the technical point of view there are some bearish signals to be taken into consideration. The price has broken the up trend’s line and hit a lower low. Any bearish signal encountered under 1.3700 (like candle stick patterns, price patterns or anything based on technical indicators) can be considered strong. Above 1.3700 the bears loose powers and bulls might get back the terrain to 1.3800. A clear drop under 1.3570 low would mean a strengthen of the US Dollar with the next target at 1.3520/00.
Let us go on to our next currency, GBPUSD. In its first day of 2014 the Britain pound has reached a maximum at 1.6600, but didn’t maintain this position, dropping all the way to 1.6336.
Today Great Britain has released its services PMI which dropped to 58.8 from 60.00 last month, but despite this data we can see that the GBP had gained in front of the US dollar, but this has happened because of sell off on the greenback.
For this week we can see that are scheduled on Wednesday to be released the Halifax HPI. Thursday will be more important because of the releases on the US dollar but mainly because the BOE will have its monetary policy meeting and will release the Official Bank Rate and the Asset Purchase Facility.
Looking at the technical analysis we saw that the price broke the trend line, or better said the lower line of the Rising Wedge. This breakout could be a false one if the bears will push the price above 1.6450, and the next targets at 1.6500 and 1.6550. A daily close under 1.6350, on the other hand, could mean that bears are still in command and are willing to push the price all the way to 1.6300 or even lower to meet the Rising Wedge target.
These two are currency pairs that would be very interesting to follow this week especially because there will the policy meetings for both the ECB and Bank Of England, and the volatility will pick up the pace.