With markets expecting the FOMC Minutes later in the North American session, the currencies on the Forex dashboard sit in tight ranges.
The EURUSD pair, the most popular to trade among retail traders due to the low spreads it offers, found only sellers after tripping stops above the 1.2550 level. What followed was a sea of red on the pair’s chart, with 1.23 in focus next.
Today’s PMI’s in the Eurozone show no green light for Euro bulls. They succumbed to 4-month low both in Germany and France.
With the Italian elections on the horizon, the risk is the Euro will still have some fundamental impediments moving forward. And then there’s the technical picture…
Euro Technical Picture
The problem with all the fundamental doomsayers comes from the technical picture. Like it or not, the EURUSD’s move from 1.06 to 1.20 IS an impulsive move.
Moreover, it can’t be part of a corrective wave of a bigger degree (e.g. zigzag), but only part of a new, stronger impulsive wave. In plain English? The price action for the last three months or so represents just a correction.
Is it possible to still move lower? Yes. Much lower? Still yes.
But it’ll only build energy for a stronger bounce if that’ll happen.
ECB in Focus Next
The European Central Bank meeting in March will be a cornerstone of monetary policy. Recently, the Spanish Finance Minister seems to have won the Vice President of the ECB job from the Portuguese Victor Constancio.
It brings pride and confidence in Spain, a country that suffered greatly during the Eurozone crisis a few years ago. Plus, the battle for Draghi’s successor only started: will it be a German name (Weidmann) or we’ll see a French again? (Coeure).
In any case, the point I’m trying to make is that hurdles still exist. But then, every year has some important event, and if the market will consider them all, then it’ll never move.
Expect 2017 to be a volatile year for the currency markets. Moreover, look for correlations to break.
If anything, they already start to crack: the USDCAD is up over four big figures, with EURUSD holding ranges better. Moreover, the USDJPY seems to have found some buyers below 1.06.
The FOMC Minutes later today should only come to steer the direction for the dollar. But investors already position for March important economic data and calendar events.
Also published on Medium.