How Did The EURUSD Dropp1.48% 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.

BOE and ECB maintained the interest rate

Bank of England maintained the interest rate at 0.50% and the QE unchanged. They expect for the inflation rate to keep on climbing for the next period.  GBPUSD touched 1 month low at 1.5075 and it is traded now at 1.5102

ECB did not touch the interest rate, but investors are waiting for the press conference. Mario Draghi will get all the attention. He might be reserved in what concerns the economy evolution and say that they will be prepared to cut the interest rate if necessarily.

EURUSD is still calm under 1.3000. Lower limit would be 1.2950 and 1.2900, while upper limits are found at 1.3000 and 1.3050.

FX: Today’s Wrap Up, GBPUSD Signaling Reversal

Today’s calendar was full of economic publications with high impact on the Forex market.

For the Euro Area (Italy and Spain) the services PMIs were mainly in line with expectations. A surprise came from Retail Sales which had a 1.0% growth.

The USA reports were the most expected by investors. The ADP Non-Farm was published above expectations, 188K. This good reading was balanced by a lower Trade Balance, 45.0B, Unemployment Claims in line with the expectations, 343K, and a lower than expected ISM Non-Manufacturing PMI, 52.2.


Chart: EURUSD, H4

Euro with the US dollar had a dip right after the ADP release, but it didn’t last too much because the next data from United States have pushed the dollar lower and the quotation got back above 1.3.

On the chart we can see several bullish signals. First, the price action made a Falling Wedge, second the RSI made a positive divergence. If the signals will be confirmed, we might see a rally of the euro back to 1.3100 or 1.3190.


Chart: GBPUSD, Daily

In our last analysis on GBPUSD (FX: GBPUSD Is History Repeating Itself?) we were expecting for this pair to recover after an important fall. After a false breakout under the support the British pound started to gain. Today’s rally was triggered by a very good Services PMI (56.9 vs. 54.6 expected).

At this point a Bullish Engulfing was drawn. This pattern could be the confirmation needed for an up move. A rally of the GBP could get the price up to 1.5350 or even 1.5400.


Chart: USDJPY, H4

The dollar gained 7.5% in front of the Japanese yen during the last month. Now we can see that the price is pretty close to the trend’s line. A break under it, or better said, under the 99.25 support could trigger another fall for the US dollar. Potential targets for a fall are 0.382 retrace (98.13) and 50% retrace (97.30).

If the local resistance, 100.15, will be broke, we can expect a rally back to 100.80 or even higher, to 101.00.