The pair has been trading in a range as traders are hesitated about the direction of this pair. Last week's and this week economic data have been showing that employment figures are weakening in the U.S. By which initial jobless claims increased to 304K vs 287k , ADP employment change falling to 213K vs 212K and unemployment rate increasing to 5.70% vs 5.60%. At the same time personal income
rose by 0.30% vs 0.20%, however income was not positively correlated with spending as people are probably saving up to anticipate any future increase in energy prices. In fact personal spending fell by -0.30%. Yesterday, the USD was under selling pressure as retail sales fell by -0.8% vs 0.4% adding concerns that the purchasing power is losing steam, which might translate into delayed raise in fund's rates. Traders are expecting that the Federal Reserve
is going to raise rates in June of this year. However the Fed has been saying that they will monitor inflation
and employment figures to assess the right timing by which raising rates is effective. Since Yellen is also a dove, the probability of raising rates might take longer than many traders are anticipating. On the other hand, the ECB is about to launch its QE
programme in March of this year, which should inflate the Euro
currency and cause it to depreciate given that the bank's deposit rates in the negative territory. In addition the Euro inflation
rate is way too far below the Eurosystem staff target of close to but below 2%. A lower Euro
will help European countries exports, especially if the global markets grow at a faster pace. Geo-political problems in Ukraine are also rebelling investors as worries about political stability rise. Energy prices at current levels could hinder inflation
from growing as desired. In conclusion, a lower Euro
is better for the Euro
economy. So, we could say that over the medium and long term, the Euro
shall continue the big picture trend (downtrend).
From the technical point of view, prices pitched up after the disappointing U.S. retial sales news to find resistance at 1.42 levels. The pair was also rejected three times at the 1.12 support level
.There are two probable scenarios for this pair.
1st scenario: Prices will be rejected at the 1.42 resistance levels and will push down to break below the 100 DMA acting as a support. In that case prices might finally confirm a continuation of the downtrend.
2nd Scenario: Prices will break and close above the 1.42 resistance level
, to find resistance at point "C" in the bat pattern
(1.15) to push back down to the point "D". Point D lies at the top of the doji
Have a nice trade.