EUR/USD: Focus Is Shifting To Friday’s Non-Farm Payrolls

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GROWTHACES.COM Forex Trading Strategies:

Trading Positions

USD/JPY: long at 118.70, target 121.80, stop-loss 119.20

EUR/GBP: short at 0.7850, target 0.7700, stop-loss 0.7880

EUR/CHF: long at 1.2025, target 1.2090, stop-loss 1.1995

AUD/NZD: short at 1.0530, target 1.0200, stop-loss 1.0440

Pending Orders

EUR/USD: sell at 1.1845, if filled target 1.1620, stop-loss 1.1920

GBP/USD: sell at 1.5110, if filled target 1.4910, stop-loss 1.5180

USD/CHF: buy at 1.0140, if filled target 1.0330, stop-loss 1.0080

USD/CAD:buy at 1.1720, if filled target 1.1990, stop-loss 1.1650

Daily Forex Analysis And Trading Strategies

EUR/USD: Focus Is Shifting To Friday’s Non-Farm Payrolls

(sell at 1.1845)

• The Fed published minutes of the FOMC’s December 16-17 meeting. In the opinion of FOMC members a broad set of data show that the economic activity in the United States recovers. The Committee believed that the net impact from the drop in oil prices would likely be positive for economic growth and employment. The minutes said: “Many participants pointed to relatively high levels of consumer confidence as signaling near-term strength in discretionary consumer spending, and most participants judged that the recent significant decline in energy prices would provide a boost.” Still low inflation and darkening economic outlook for the euro zone and Japan are the main obstacles for setting a particular timetable for raising rates.
• Regarding the wording of the statement, most FOMC participants believed that by referring to “patience”, the Committee was indicating its intent to keep administered rates at the zero bound for at least the next couple of meetings.
• Chicago Federal Reserve Bank President Charles Evans is one of two Fed officials who have said rates probably should not rise until 2016. Every other Fed official has said a rate rise this year would be appropriate, with many saying that mid-2015 would likely be a reasonable time. Charles Evans is very concerned that inflation does not look likely to return to the Fed’s 2% goal until 2018. He added he would be open to raising U.S. interest rates in 2015, earlier than he currently thinks would be appropriate, but only if rate hikes are shallow enough.
• The minutes were interpreted as less hawkish than expected by the market. However, the reaction of the EUR/USD was short-lived and limited. The rate rose slightly and the EUR/USD opened the Asian session at 1.1840. The rate fell again near 1.1800 soon. The sentiment is bearish ahead of Friday’s non-farm payrolls reading. A strong reading could result in the EUR/USD falling to new multi-year lows.
• The ADP National Employment Report showed U.S. private employers added 241k jobs in December, beating the median forecast of 226k. November’s private payrolls were revised up to 227k from the previously reported 208k. ADP data may strengthen expectations for Friday’s official jobs data. Our forecast for non-farm payrolls (228k) is slightly lower than the median forecast (240k). We expect a fall in unemployment rate to 5.7% in December from 5.8% in November.
• German industrial orders fell by 2.4% mom in November vs. forecast of a fall by 0.7% mom. Euro zone retail sales data were better than expected. Retail sales rose by 0.6% mom in November vs. median forecast of 0.5% mom and 1.5% yoy after a rise by 1.6% yoy in October.
• The EUR is under pressure of firming expectations the ECB will announce full-blow quantitative easing on January 22 and political uncertainty in Greece that holds earlier elections on January 25. In our opinion ECB President Mario Draghi may disappoint the markets and postpone the decision on QE due to weakening EUR that eases monetary conditions and improves competitiveness of exports. In such a scenario a significant jump of the EUR/USD cannot be excluded. Even if the ECB takes further steps to support economic activity, the EUR/USD may react in strong profit taking on recent EUR-selling positions.
• Our EUR/USD long position reached the stop-loss at 1.1790. The very short-term outlook is strongly bearish now and in our opinion the EUR/USD is likely to break below lows from 2005. Our EUR/USD trading strategy is to sell at 1.1845. If the order is filled the target will be 1.1620.

Significant technical analysis’ levels:

Resistance: 1.1848 (hourly high Jan 8), 1.1897 (high Jan 7), 1.1969 (high Jan 6)

Support: 1.1640 (monthly low Nov, 2005), 1.1376 (monthly low Nov, 2003) 1.1212 (61.8% of 0.8228-1.6040)

GBP/USD: Get Short At 1.5110

(sell at 1.5110)

• Mortgage lender Halifax said British house prices rose by 7.8% in the three months to December compared with the same period last year, the weakest increase since January last year. But house prices in December alone rose 0.9%, the biggest monthly increase since last July.
• The MPC delivers its monetary policy decision today at 12:00 GMT. It is widely expected that rates will stay at 0.50% and QE will be held at GBP 375 bn. Today’s BOE meeting will be rather a non-event for forex traders.
• The GBP/USD rose slightly after FOMC minutes yesterday. The minutes were less hawkish than expected as they brought no new insights as to the timing of a Fed rate hike. The recovery of the GBP/USD was limited and the rate fell again today. The GBP/USD reached a day’s low of 1.5035.
• The nearest target for the GBP/USD bears is 1.4814 – 2013 low from July 9. However, we can see some profit taking on GBP-selling positions near 1.5000.
• Our GBP/USD trading strategy is to sell at 1.5110. If the order is filled the target will be 1.4940.

Significant technical analysis’ levels:

Resistance: 1.5118 (hourly high, Jan 8), 1.5157 (high Jan 7), 1.5274 (high Jan 6)

Support: 1.5028 (low Jul 15, 2013), 1.4845 (low Jul 10, 2013), 1.4814 (low Jul 9, 2013)

Daily Forex Analysis And Trading Strategies