Daily Analysis: Euro Back Above 1.20 as Draghi Drives Traders Crazy

Thursday Market Recap

Asset Current Value Daily Change
S&P 500 2461 -0.19%
DAX 12301 0.71%
WTI Crude Oil 49.36 0.23%
GOLD 1352.00 0.95%
Bitcoin 4258 -0.89%
EUR/USD 1.2005 0.75%

“Mario Draghi sent conflicting signals”; that’s the polite way of saying that the President of the European Central Bank tried everything to keep his cards as hidden as possible regarding the future of the bank’s monetary policies. Financial markets, especially forex markets turned insanely volatile during his press conference as algos and traders tried to figure out what the central bank is planning. While the recent economic numbers still look more favorable in the Eurozone than the US, the exuberant buying in the common currency could already lead to weakness in the area, and the current strength might very well be cyclical in nature  to begin with. That said, for now at least, central bank policies are still dominating markets, and the ongoing long-term trends could (US stock long, EUR long, USD short) might still have legs before the next major shift.

EUR/USD, 5 minute Chart Analysis

Stock markets barely budged after the mixed speech by Draghi, and with no change in the monetary statement and the actual ECB policies, all eyes are now on the Fed’s meeting later on this month. The DAX continued to rally today, as we expected, and the Euro strength looks to have lost its dominance over European equities, as the two asset classes are strongly diverging. Gold shrugged off the central bank jitters and marched as high as $1350, as North Korea and Hurricane Irma still rule the headlines, while Donald Trump is planning on getting rid of the – already quite ridiculous – US debt ceiling. The geopolitical risks and the negative USD trend drive the price of oil higher as well, as the commodity is inching ever closer to the $50 per barrel level in the WTI contract.

WTI Crude Oil, 4-Hour Chart Analysis

Cryptocurrencies

The volatility in the price of the major coins declined significantly in the last couple of days, although NEO still provides extreme moves. Bitcoin and Litecoin are leading the way higher, with the latter being very close to a new all-time high from a technical perspective. Most of the currencies are still well below the prior record levels, though, and with the still overbought long-term setups in mind, the current lull could be the calm before the next storm. That said, some of the majors are still at attractive levels, such as ETC and XRP, and investors cold look for dips to buy those coins in the coming period.

LTC/USD, 4-Hour Chart Analysis

Technical Picture

The S&P 500 is trading in a narrow range since the strong Tuesday bounce, and we still expect the short-term momentum to carry the benchmark to at least its prior high, with a likely breach of the 2500 level. The long-term picture is still far from promising given the internal weakness of the market, and the coming two months sport the most negative seasonality in the year, so the chances of a deeper correction will are high. The rising long-term trendline is just above the strong support zone near 2520 while the 2450 level is the first line of defense for bulls here.

S&P 500, 4-Hour Chart Analysis

Key Economic Releases on Thursday

Time, CET Country Release Actual Expected Previous
3:30 AUSTRALIA Retail Sales 0.0% 0.2% 0.3%
3:30 AUSTRALIA Trade Balance 0.46 bill 0.95 bill 0.86 bill
9:30 UK Halifax HPI 1.1% 0.2% 0.4%
13:45 EUROZONE ECB Rate Decision 0.00% 0.00% 0.00%
14:30 CANADA Building Permits -3.5% 2.2% 2.5%
14:30 EUROZONE ECB Press Conference
14:30 US Unemployment Claims 298,000 245,000 236,000
16:00 US Crude Oil Inventories 4.6 mill 4.1 mill -5.4 mill

Key Economic Releases on Friday

Time, CET Country Release Expected Previous
1:50 JAPAN Final GDP 0.7% 1.0%
3:30 CHINA Trade Balance 321 bill
10:30 UK Manufacturing Production 0.3% 0.0%
14:30 CANADA Employment Change 15,000 10,900
14:30 CANADA Unemployment Rate 6.3% 6.3%

Featured image from Shutterstock

Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.