EUR/USD Forex Technical Analysis for June 16, 2016
Technical Analysis – The EUR/USD pair rose slightly during the day on Wednesday, as the 1.12 level offered a bit of support. With this, the market looks as if it is ready to continue to find quite a bit of volatility and perhaps buyers in this particular scenario. I think that this market will continue to be very choppy, and therefore a little bit unstable. Short-term traders will be attracted to this volatility and they do believe that if we are about to see the Euro bounce a bit. However, I would not get married to any long positions at this point in time.
In Other view point – The key focus will be on next week’s UK Brexit vote
- Market Movers
With the Fed out of the way the key focus will be on next week’s UK Brexit vote.
- US CPI inflation is due and we expect core CPI to have increased 0.2% m/m, taking the annual core inflation rate to 2.2% from 2.1%. Note, however, that the Fed is focusing on the core PCE deflator, which is still below 2%. The US also releases the NAHB housing index for May.
- Bank of England (BoE) is meeting today. No change is expected ahead of the Brexit vote but BoE is likely to strike a very cautious tone given the latest deterioration in data signalling slower growth. There is also a discussion within BoE whether the slowdown is related to the Brexit vote or not. UK retail sales are due for release today. They rose quite strongly in April and there is a risk of some payback in the May data.
- Other releases will be final euro inflation for May expected to be unrevised at -0.1% y/y and US jobless claims, which will give more signals of whether the US labour market is indeed slowing down. Claims have pointed to a stronger job situation lately than the recent payroll reports.
Selected Market News
US stock markets finished lower yesterday despite a more dovish Fed than anticipated. US bond yields dropped on the back of the more dovish message from the Fed while EUR/USD increased slightly. Asian stock markets have continued lower and the JPY strengthened as Bank of Japan (BoJ) refrained from adding stimulus at its meeting this morning. Around one third of economists polled expected more easing from BoJ today. As expected the Fed yesterday adopted a wait-and-see stance but sent an overall more dovish message than expected and yields dropped across the curve. The ‘dots’ were revised lower to only one hike this year, we believe. We stick to our view that the Fed will hike in September but stress that risks are skewed towards a later hike.
BoJ refrained expanding monetary stimulus at the meeting today awaiting the result of the Brexit vote and election in the Japanese upper house on 10 July. More easing is expected at its 29 July meeting as economic data are weak and BoJ has to act to stop the strengthening of the JPY.
In Other view point – Back To US Dollar Selling Mode – 6/16/2016
Some trades are obvious. Selling US dollar0.00%% against Australian Dollar-0.80% and New Zealand Dollar is one of them. And now since Fed is out of the way, we can cautiously dabble into EUR/USD0.27% long too. There was no surprise in Fed decision after FOMC yesterday and everybody in the town knew that. You can say that by reading the price action of USD pairs before the FOMC . Everything was up because of front running FOMC . And as soon as the news came out, fast money took some profit and thus the pullback in those pairs.
Now we are back to US dollar0.00%% selling mantra and looking for good levels to get in or add to our existing positions in case of AUD/USD-0.68% .
For EUR/USD0.27% , break of 1.1300 is needed before we put more risk into the trade. Until that happens, we are happy to trade EUR/USD0.27% with long bias. Initially we would like Euro0.27% to hold 1.1240 / 1.1220 on pullbacks.