Good morning traders.
I talked last Monday about my cautious view that the eurusd might be getting some slight relief up the price chart as we kick off the new quarter.
This was primarily based on some fresh shoots re the EZ economy, beats in China data and the level of the USDx. There was also a certain amount of ´gut feel´ at these levels due to the time we have spent carving out a range and the propensity for heavy speculative short positions to spring back the other way.
However, looking at the close of the first week we didn’t see much of this unfolding – at least not yet.
We remained above the low of the week but the 2 down days on Thursday and Friday left the strong push up on Wednesday after the bullish doji looking a little out of kilter.
We closed the week in the red and although we are still above 1.12 (which is significant), the idea that we might be looking to carve out a lower range (another scenario we discussed) looks more likely than a push higher from a technical pov. However, we will keep an open mind.
It all depends on the ECB on Wednesday. Any change in rhetoric or tone will be instrumental in where we go next. That said, I can´t see why Draghi would be looking to alter anything given that he vacates the job in October and he will not be looking to make his successors job any more difficult by locking them into any untimely policy decisions made near the end of his term.
In which case my guess is we can expect a continuation of the dovish theme.
The relatively strong US jobs data on Friday gives no reason for the Fed to start considering rate cuts (or heeding Trumps calls for more accommodative policy). In which case there’s no real change in relative monetary policy stance between the US and the EU.
Had we seen poor US data it might have given a slight boost to the relative position of the euro to the USD. Similarly any follow through strength from last weeks low eurusd print could have changed things technically. But on balance lower seems more likely for now.
Further, the latest on Brexit does nothing to improve clarity with regard to the eurozone economic outlook as it appears the EU and the UK could be joined at the arthritic hip for up to another 12 months. I suppose I should add that on the flip side, this could be positive to the euro – it´s anyone’s guess right now!
As ever we will assess what happens on a daily basis and whatever the macro climate, it won´t practically effect our day trading strategies. Should we start to see any short covering we will adapt accordingly.
We are day traders not analysts and while its a good discipline to think through the macro economic scenarios, at the end of the day, we trade what we see – nothing more nothing less.
Form our model performance pov we had a decent week and closed out in the green . See here for results.
For today there is nothing slated data wise and we will have to wait until Wednesday for anything important when we get the ECB and FOMC meeting minutes in the evening.
The Daily Chart
We had a positive start overnight as we open the week and there´s a good chance we will see the pair testing the 1.1250 level again which contained prices last week. A positive scenario would be a push up above this level and a retest from above to try a swing long. A further failure up here could put the lid on higher prices. What is more likely is sideways action into Wednesday´s ECB and the lowest volatility in 5 years doesn’t augur well for frantic price action.
The Hour Chart
Levels as per.
The 1.1200 to 1.1250 range provides the first two target levels either side of current pa as we kick off the week. 1.1180 and 1.1280 give us the extended range.
Look for price action at these levels and trade accordingly. My plan in the first instance is to fade these levels for a quick scalp unless we get a strong push through either side. In which case I will watch for any retests to trade any follow through action. I suspect we won´t be looking at much by way of continuation until we get Wednesday out of the way when traders will have a clearer view of both the euro and the USD.
Have a good week and while we are not expecting much in the next couple of days there will still be opportunity to engage. Fortune favours the brave :).