How Did The EURUSD Dropp 1.48% Last Week?


A really important week has passed for the EURUSD currency pair. As we know, in the first week of the month the ECB has the monetary statement and the press conference and the Non-Farm Payrolls is published for the United States.

At this press conference Mario Draghi pointed some things regarding the positioning of the ECB in what concerns the economy of the Euro Zone:

  • Euro Area growth risks remain on the downside
  • Inflation risks are broadly balanced, inflation rates may be volatile throughout the year
  • Economy should recover at subdued pace
  • 0.50% interest rate was maintained, but it is not the lower bound
  • The rates to stay low for extended period of time
  • ECB keeps an open mind on negative deposit rates

If this wasn’t enough, S&P lowered Portugal’s outlook to negative from stable. The country’s current grade is BB and rating company sees one in three chance of ratings cut within the next 12 months, and the also see a deficit about 5.8% of the GDP for 2013.

For the United States the story is a bit different. Several weeks ago Ben Bernanke said that the Federal Reserve is preparing for tapering the Quantitative Easing Program by the end of 2013, and stop it in 2014. The conditions for these measures were that the economy to head towards their forecast and the unemployment rate to drop to or under 7%.

One day after the ECB’s press conference, the Non-Farm Payrolls was published. It surprised the market with a value of 195K vs. 165K expected, and the previous value revised to 195K. Even though the Unemployment Rate did not come as expected and stagnated at 7.6%, the biggest impact came from the NFP.


Chart: EURUSD, Daily

This week Euro dropped almost 1.5%. The biggest fall took place on Thursday and Friday. The speech of Mario Draghi did not encourage the investors to buy euros and the dollar continued its trend. Next day, the economic data showed an improvement in the US labor market, the dollar continued to appreciate.

From the technical point of view EURUSD got to a good support area, formed by 1.28 level and a trend line. The probability for the down trend to continue it is quite high. If this area will fall the next good support it is at 1.2650. Before a breakout we could see a bounce back to 1.29 or somewhere near 1.30.


Europe Is Still Struggling

Europe Is Still Struggling

In his speech today, Mario Draghi maintained the structure of his last talk. Constrained by the obvious reality, he had to admit the lent pace of recovery and the long list of problems that are not yet solved, as the weak conditions in the labour market and the economic slowdown. On the other hand, the accommodative position of the monetary policy together with the improvements made since mid-2012 and the banking union system should keep the stability of the euro zone.

The heart of Euro zone, Germany, is pumping the same weak and negative sentiment about the current economic situation, announcing a contraction of -0.1% in the industrial production as well as a decreasing trade balance (14.1B). It is difficult to expect positive results in an environment dominated by instability and lack of trust in the Government’s institutions. On the long term, we may be witnessing of improved conditions if the pace of restructuring is maintained.

Australia, Negative Outlook

Australia, Negative Outlook

Mining (down 15 to -28 points), retail (down 17 to -28 points) and manufacturing (down 13 to -27 points), one by one the most important sectors of activity in Australia are ceasing to work at previous standards. Thus, the business conditions went back to low levels from May 2009. The overall outlook is disappointing: weak employment conditions, decreasing demand, falling prices, low interest rates and a falling Australian dollar. These weaknesses may be explained by the global weaker conditions and low demand for raw materials.

The wholesaling numbers are considered to give a reliable idea about the evolution of the economy, as the history has been proved this relationship. In these circumstances, by the end of 2013 the economy of Australia is expected to run below the trend. Recent press conferences revealed the fact that a better controlled and supervised financial system is the main concern and the key to solve important issues with long term implications.

FX: EURGBP Bearish Signal Out Of Nowhere

EURGBP Bearish Signal Out Of Nowhere

Today the Great Britain Manufacturing Production fell unexpectedly -0.8%, while the expectations were of 0.3% growth. The industrial production stagnated and the Trade Balance was in line with the forecasts.

Chart: EURGBP, Daily

These release had a negative impact over the evolution of the GBP. GBPUSD dropped under its latest low and EURGBP touched a high at 0.8668. The most interesting evolution of the day came after the downgrade of Italy. Euro lost almost everything it had gained and EURGBP fell back under 0.8600.

If this day will close around 0.8595 we can say that the break above the 0.8630 resistance was a false one and a Shooting Star pattern will be confirmed. We are expecting for the price to continue the fall, during the next days, back to 61.8 Fibonacci retrace (0.8550) of the preceding move. The setup will be invalidated only by a close above the current high.

What Caused Euro To Fall Under 1.2800?

What Caused Euro To Fall Under 1.2800

After the ECB press conference from last week and the good NFP for the United States, yesterday the Trade Balance and Industrial Production fell for Germany.

While already to the ground the Euro Area and the Euro currency take other kicks. Today it was announced that Greece will get the aid and everything seemed to be cooling down, Italy was downgraded to BBB from BBB+ by S&P.

The downgrade came after Asmussen brought other bad news for the Euro Area and knocked the Euro under 1.2800 with the US dollar. The German economist said that he would not rule out a new LTRO and that ECB forward guidance goes beyond 12 months.


Chart: EURUSD, H4

The price for the EURUSD currency pair seemed to be stabilizing under 1.2900 level. It did not last more than a day because after the statements of Asmussen and the downgrade of Italy the price fell fast under 1.2800 and hit a very good demand area at 1.2745. From here we can see a second reaction of appreciation.

The 14 periods RSI has drawn a positive divergence. This could be a signal that buyers will not give up right now, and that they now have backup. From 19 of June the price has moved inside two equal downward channels. At this point a drop under 1.2740 would be a signal that the price could accelerate on the downside. If the price will manage to get back up and break the trend line then we might see an interesting outcome.


Is Gold Going To Rally Back To 1300$ Per Ounce?

Is Gold Going To Rally Back To 1300$ Per Ounce

As it looks now, in our opinion, the answer would be not yet. The FOMC meeting minutes showed that there are more members that agree with the tapering of the Quantitative Easing program, but it wasn’t specified the date for the start of the tapering. The speculated date was September this year, but it seems that the Federal Reserve has to see whether the unemployment rate is heading to 7%.

Chart GOLD, H4

Chart: GOLD, H4

After the Minutes the dollar lost some ground, gold rallied to 1265$ per ounce but didn’t stay too much there. In less than an hour Ben Bernanke will have a speech and the investors will keep their eyes and ears focused on what the Fed’s chairman is going to say.

From the technical point of view, the price of gold encounter a good resistance area at 1268.00 level, that was tested 2 more times in the past 3 weeks, and could not pas. The bounce off 1265$ might mean that the pressure is still on the downside, even though it can be spotted an Ascending Triangle price pattern on the chart.

To wrap it up, during the speech of Bernanke we will look at the support 1243.30 and resistance 12568.45 key levels. Under the support the targets will be 1220.00, 1200.00 and 1180.00, while above resistance the price targets would be 1302.45 and 1350.00.


Should We Believe In Japan’s Recovery?

Should We Believe In Japan’s Recovery

The press conference of Bank of Japan announced its optimistic view concerning the next 2 years period. In this matter, the latest data about Japan came better, together with the successful implemented quantitative easing, promise to keep Japan safe. Thereby, an increase in exports and public investments along with a moderate increasing in industrial production and accommodative financial conditions have great potential to lead in maximum 2 years to the targeted 2% inflation. The monetary stimulus activity has been shown to have great results so far and is being maintained for the moment with the possibility of adjustments. Moreover, the International Monetary Fund rised its forecast for Japan from 1.6% to 2% growth this year, becoming the only bright economy from the Group of Seven industrialized economies.

On the other hand, the slowing economy of China is posing serious problems, as well as the weak Europe, the fragile United States and the weakening of the commodity-exporting economies.


Apple Inc. Is Signaling A 5% Drop On Rising Wedge

Apple Inc. Is Signaling A 5% Drop On Rising Wedge

The stock of the week is Apple Inc. with a pretty interesting price pattern. After the 15% drop started at the beginning of June the stock managed to gain back 61.8.

Chart AAPL, H1

Chart: AAPL, H1

On the way up the price started drawing a Rising Wedge, which topped at 430.50$ per share. The price pattern was formed during the last 3 weeks. In all this time it can be observed that the volume started to drop. Next to this signals we can also add the 14 periods RSI which has made a negative divergence and it dropped under its trend line.

Now the price got very close to the apex of the pattern. The width of the Wedge is 21.50 dollars. If the pattern will be confirmed by a close, on a one hour chart, under the lower line, we can expect for the stock to lose at least 5%. Why at least? Because if we look at the trend, it is descending, so a new drop might become another impulse for the current main trend.

Even though our favorite scenario is on the down side, we have a backup. If the price will break and close above 431$ per share we will revise our analysis.


EURUSD Was Not Yet Ready For…

EURUSD Was Not Yet Ready For

In the first week of June, Mario Draghi said that ECB will keep the interest rates at record low for an extended period of time and there are arguments for it to be cut even more. In the same week, on Friday the Non-Farm Payrolls surprised the market with a value above all forecasts. The dollar got stronger and stronger, managing to get the EURUSD quotation under 1.2800.

The story does not end here. Last week, the second week of the month, were published the FOMC Meeting Minutes and Ben Bernanke had a speech titled “A Century of US Central Banking: Goals, Frameworks, and Accountability”. Investors were disappointed to see that, in the minutes, there was no date from which Fed will start tapering the monetary easing program. The full attention was moved to Ben’s speech, but nothing was said about any dates. This time the dollar started to lose and in several hours EURUSD got back over 300 pips.

Next week Ben Bernanke will testify on the Semiannual Monetary Policy Report before the House Financial Services Committee, in Washington DC

Chart EURUSD, Daily

Chart: EURUSD, Daily

Looking at the price action of EURUSD we can say that it wasn’t ready to break out from the consolidation pattern, which is actually a symmetrical triangle. The lower boundary is around 1.28 level while the upper one sits at 1.34. The main axis, as it can be seen on the chart, is 1.3200. This level seems to be the equilibrium one.

If the price breaks above 1.32 we can expect for it to test the upper line of the triangle, while if it drops or remains under the pressure rises on the lower line of the pattern. This currency pair will remain sensible to the economic data published from the United States and will the volatility will increase during the speeches of Mario Draghi and Ben Bernanke.

Gold (XAUUSD) Might Bottom Around Current Levels

Gold (XAUUSD) Might Bottom Around Current Levels

After hitting a low under 1180$ per ounce the price of Gold bounced back to 1290$ per ounce. The most interesting thing about this throwback is that the commercials are still net short on this instrument, but the open interest is on the up move. This might mean that the precious metal is being bought by private investors more, and less by Central Banks and Hedge Funds.

Chart XAUUSD, Daily

Chart: XAUUSD, Daily

Tomorrow Ben Bernanke is expected to have another speech. Investors will look for signals regarding the Quantitative Easing. If the Fed will start tapering it later than September, we might see another rally in the price of gold, while if this date will be maintained there is a possibility for the price to drop suddenly.

Looking at the technical analysis of gold’s price chart using a system based on Ichimoku Kinko Hyo, we observed that the price is now in the layer between the Tenkan-sen and Kijun-sen averages. Adding a Fibonacci retrace we can conclude that 1300$ per ounce is a very good resistance level. If the price will break and close above this level we can expect for it to rally to 1350$ per ounce, where it will find itself in the Kumo.

Even though the signals are bullish, keep an eye on the 1270$ support. A break under this level could mean another drop for the price of gold. The target levels for a down move are 1210$ and 1180$ per ounce.