Trading plan for 08/09/2017:
The financial markets remain focused on negative information around the US Dollar - geopolitical, fiscal, dovish signals from the Fed and the hurricane. This is why EUR/USD is trading above 1.2080 and USD/JPYhas broken below 108.00. The Japanese Nikkei is down 0.7%, but Hang Seng is up 0.4%. Gold remains at the elevated levels around $1,357.
On Friday 8th of September, the event calendar is quite busy with important news releases. Switzerland will release Unemployment Rare, Germany will post Trade Balance data and France will present Industrial Production data. Later on, the UK will post Industrial and Manufacturing Production data. During the US session, Canada will present Unemployment Rate and Employment Change data and the US will post Wholesale Inventories data.
EUR/USD analysis for 08/09/2017:
The German Trade Balance data and France Industrial Production data are all scheduled for release during the early hours of the London session, but market participants are still absorbing yesterday's Mario Draghi comments after the interest rate decision. After leaving the interest rates unchanged at the level of 0.0%, the ECB President said during the press conference, that recent Euro's volatility is a source of uncertainty. Moreover, he added, that inflation outlook hasn't broadly changed, underlying inflation pressures remain subdued and very substantial degree of accommodation is needed. At the end, he stated, that the QE programme will be extended as long as necessary as the ECB is reluctant to commit to a QE announcement date.
The ECB staff forecasts were in line with the leaks. The growth forecasts were tweaked slightly higher and inflation a tad lower. Growth this year was revised to 2.2% from 1.9%. The GDP forecast for 2018 and 2019 was left unchanged at 1.6% and 1.7% respectively. The CPI forecasts were revised lower, mostly due to exchange rate appreciation. For this year, headline inflation is expected to be 1.5%, down from 1.6% in June. Next year's forecast was trimmed to 1.2% from 1.3%. Inflation in 2019 is expected to be at 1.5% rather than 1.6%.
In conclusion, it was a very dovish statement from Mario Draghi that surprised market participants as they expected a completely different rhetoric. He reiterated the old statements, that the ECB does not target the currency but that the exchange rate is important for growth and inflation expectations. After the press conference was over, the Euro appreciated across the board.
Let's now take a look at the EUR/USD technical picture at the H1 time frame. After breakout above the level of 1.2000, the price rallied towards the level of 1.2090. Currently, the market conditions are overbought on H4, Daily and Weekly time frames and there are clear and visible divergences between the price and momentum indicators on various time frames. Nevertheless, as long as the technical support at the level of 1.1829 - 1.1847 is not clearly violated, the outlook remains bullish.
Market Snapshot: US Dollar Index makes another lower low
The price of DXY has made another lower low at the level of 91.02 after the technical support at the level of 91.62 was broken. The market is now trading in extremely oversold conditions and the bullish divergence is visible at the various time frames. Only a sustained break out above the golden trend line would put the bulls in control over this market again.
Market Snapshot: Crude Oil rise to 78%Fibo
After the Hurricane Harvey disruptions in oil supply, the price of oil went up towards the recent swing highs but was so far capped at 78%Fibo at the level of $49.38. Themarket conditions loofs overbought, but the momentum is strong, so after a local correction the bulls might still attack the swing high at the levle of $50.40.
