Expected Euro Strengthening

 | Jun 10, 2016 03:06AM ET

Previous:

After a break in the support at 1.1375 and the balance line (average line with a 55 period) on Thursday, the euro/dollar dropped to 1.1305 without a pit stop. The buyers were pushed into closing long positions by the yen crosses.

Later on, some information came out about how the euro will be sold because of the ECB purchasing corporate bonds. Traders focused on how the bank acquired bonds from Italy’s largest telephone company - Telecom Italia (MI:TLIT) SpA - on May 8th, and this company has two speculative rating levels from Moody’s and S&P.

The ECB noted, however, that these securities still have an investment level from Fitch. This runs in line with ECB requirements formally, but traders saw the inclusion of Telecom Italia SpA in the list of purchases as the regulator’s readiness to buy up bonds without investment levels if QE is to be expanded.

The dollar received support during the American session from data on unemployment benefit applications in the US. The number expectedly fell from 268k to 264k (forecasted (270k).

Market Expectations:

The euro/dollar fell 124 points to 1.1291. I reckon the euro will drop to 1.1281, after which I expect to see a revival of the quotes to 1.1345. Today is Friday; the news is lacking, so a correction on yesterday’s downward wave could be just about right. If the buyers pass 1.1281, the next support level will be 1.1255.

Day’s News (EET):

  • 10:00, German central bank president Weidmann to speak;
  • 11:30, UK May consumer inflation expectations;
  • 15:30, Canadian unemployment level and job creation in May;
  • 17:00, US preliminary consumer sentiment and inflation expectations in June from the university of Michigan;
  • 21:00, US May federal budget balance.


Technical Analysis:

Intraday forecast: minimum: 1.1285, maximum: 1.1345, close: 1.1324.