What will determine the price of EURUSD Pair: Macroeconomic figures, monetary policies of the Central Banks or the lords of the currency wars?
Last week we saw similar articles and news published in Bloomberg and Financial Times pointing out a possible U.S FX Intervention.
Bloomberg:
“The buzz around possible U.S. currency intervention is growing louder as Goldman Sachs Group Inc. has now weighed in on an idea that’s been making the rounds on Wall Street.
President Donald Trump’s repeated complaints about other countries’ foreign-exchange practices have “brought U.S. currency policy back into the forefront for investors,” strategist Michael Cahill wrote in a note Thursday. Against a fraught trade backdrop that’s created the perception that “anything is possible,” the risk of the U.S. acting to cheapen the dollar is climbing, he said.”
“Goldman joins analysts from banks such as ING and Citigroup Inc. in writing on the prospect. The intervention has become a hot topic since Trump tweeted last week that Europe and China are playing a “big currency manipulation game.” He called on the U.S. to “MATCH, or continue being the dummies.”
Buoyed in part by a round of Federal Reserve rate increases, the dollar has strengthened against many of its peers. A Fed trade-weighted measure of the greenback isn’t far below the strongest since 2002, underscoring the competitive headwinds American exports face overseas. Trump has grown concerned that the currency’s strength will undermine his economic agenda, which has also fed into his criticism of the U.S. central bank.
Still, in a tweet on Thursday, where Trump criticized Facebook Inc.’s plan for a digital currency, the president came out in support of the greenback, calling it “by far the most dominant currency anywhere in the world.”
The market has yet to display much concern about the prospect of U.S. intervention: Global currency volatility is at a five-year low. However, the risk of Trump moving beyond words to achieve a weaker greenback would increase if the European Central Bank pursues further monetary stimulus
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In the intensifying currency war against the Eurozone (Germany), he will instruct the US Treasury (via the NY Fed) to intervene directly and unilaterally to drive the dollar lower.
This is not surprising. F.T summarized the case well: “Action to weaken the dollar is a ‘low but rising risk”
We will focus on 1.13600. Firm closings above 1.13600 can be the confirmation of U.S. FX Intervention. But we should not forget that ECB is ready for a Euro Intervention.
What will calendar bring us the upcoming week?
Tuesday: German ZEW Economic Sentiment, U.S. Retail Sales, U.S Production Data Set
Wednesday: Eurozone CPI, U.S Housing Data
Technically:
EURUSD ended the week at 1.12700 above MA50 H4 Chart. It is stuck in 80 pips trading range.
On the downside: 1.12400 is the key support and price will continue its bullish move as long as it maintains to stay above 1.12400. A firm closing below 1.12400 will send the pair 1.12000 and 1.11700.
On the upside: 1.12900 is the key resistance level. Break above 1.12900 will lead the pair toward 1.13200 and 1.13600.
On the smaller charts, we see an emerging Cup&Handle pattern. The ultimate target of the pattern is 80 pips.
Harmonic readings show two patterns. A bullish Bat Pattern at 1.12100 and a bearish White Swan pattern at 1.13500.
Summary: The pair is in Bear Market. Potential pullbacks can be used as selling opportunity.
