EURUSD: Short Term Fundamental, Technical Outlook & Forecast

Fundamental drivers for the EURUSD unlikely to live up to their potential to move the pair, trading ideas for the coming 24-48 hours

 

Summary

–Despite the apparent drama of US jobs reports and 2 Greek deadlines, little volatility expected in the next 48 hours

–Fundamental drivers and technical outlook for the next 24-48 hours

–Forecast, likely trading range, and what to do if upside and downside breakouts from that trading range

 

 

Fundamental Drivers

Theoretically, the EURUSD should be volatile Monday and Tuesday because:

  • We could see some after-effects of Friday’s US monthly jobs reports
  • The May 11 and 12 Greek Deadlines

However we believe that the EURUSD will continue to bounce around within its recent trading range. Why? The above events are unlikely to change market expectations

The US jobs reports: These didn’t change market expectations for a late 2015 rate hike. They weren’t great, but they also showed enough improvement from the prior reports to support the Fed’s belief that the prior month’s weak readings were temporary and not indicative of longer term weaknesses.

The Greek deadlines: Deadlines for political deal, empty Greek Treasury likely to be deferred to May 31

  • –May 11th: Greece was supposed to have a reform agreement with the EU by May 11th. Few expect that to happen, and fewer still will be surprised. Lenders want to see reforms on Greek public sector jobs and pensions, yet Greece wants EU concessions before committing to reforms. The usual brinksmanship so that leaders on each side can claim they fought for their voters, before inflicting a deal that voters in funding nations and in Greece will dislike.
  • –May 12th: EUR 750 million of Greek bonds come due, however Greece is likely to get some kind of extension, and Greece claims to have enough cash to meet interest payments until June.

 

Traders have grown used to both a lack of progress with Greece and last minute extensions.

Technical Analysis & Outlook Next 24-48 Hours

 

  • Support: 1.111, if broken, then 1.100.
  • Resistance: 1.129, if broken, 1.132, and see Note 1 below.
  • Momentum for the next 24-48 hours:
    • On daily chart – neutral outlook: The pair is in the double Bollinger band neutral zone (bounded by upper and lower orange lines).
    • On 4 hour chart – downward outlook: The pair is in the lower “sell zone” (bounded by the lower orange and green bands) of its double Bollinger bands.
    • On 1 hour chart – Strong downward outlook: As of this writing the pair is at the lowest extreme of its double Bollinger band sell zone.

Note 1

These are the EURUSD’s flat trading range boundaries since the April 29th.  The uptrend on the daily chart below remains in force, so we’ve included the rising channel lines of the past 2 weeks’ uptrend.

If the EURUSD breaks above the 1.132, then use the support and resistance levels shown by these upper and lower channel lines, particularly the upper line, which provides resistance levels above the 1.32 area of the flat trading range.

 

ScreenHunter_02 May. 11 07.03

EURUSD CHARTS CLOCKWISE: 1 hour, 4 hour, daily, and weekly

KEY:10 PERIOD CANDLE EMA DARK BLUE, 20 PERIOD CANDLE EMA YELLOW, 50 PERIOD CANDLE EMA RED, 100 PERIOD CANDLE EMA LIGHT BLUE, 200 PERIOD CANDLE EMA VIOLET, DOUBLE BOLLINGER BANDS NORMAL 2 STANDARD DEVIATIONS GREEN, 1 STANDARD DEVIATION ORANGE.

Source: MetaQuotes Software Corp, www.FXGlobe.com

02 May. 11 07.03

Conclusion

For Short Term Traders:

The EURUSD remains in a flat trading range with primary and secondary support and resistance levels as noted above. Given the downward momentum on the 4 and 1 hour charts, a test of support is more likely to come before a test of resistance, so be ready to play that bounce.

As always, minimize risk of loss and of emotion-driven trade decisions by having pre-planned stop loss orders ready.

For longer term traders:

Looking beyond the next 1-2 days, the key technical point to note is that on the weekly chart the 1.324 level remains solid longer term resistance, as it is supported by both the 20 week EMA and the 23.6% Fibonacci retracement drawn from the March 2014 high.

Questions? Contact us at fxglobe.com or call one of our trained trading professionals to assist you. We’re here to help you. Your success is ours!

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DISCLOSURE: The above represents the personal opinion of our Chief Analyst, and is not represented as any guarantee of what will happen by him or fxglobe.com. Trading involves risk, even for those familiar with sound risk management techniques such as those presented in Chapter 5 of Cliff’s book, The Sensible Guide To Forex. Final responsibility for all trade decisions rests with the trader.

 

 

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