Looking at the chart. consecutive closing below 1.09-1.07 zone, EURUSD may fall towards 1.04-0.98 ( to fulfill Draghi's dream !!).
On the other side, only sustaining above 1.13, the pair can rally up to 1.18-1.25 (although this is possible technically, but in reality, Draghi, the man behind the ECB's stance of "everything but the kitchen sink" will simply not allow it, because the whole QQE policy is designed for keeping EURUSD in the range of 1.15-1.05 or lower towards parity-1.00 to stimulate EU exports/economy).
Trading Idea: EURUSD
CMP: 1.1074
Either sell below 1.10 or on rise around 1.11042-1.1220
TGT1: 1.0825-1.0715-1.05235-1.04 (1-3M)
TGT2: 1.00-0.98 (6-12M)
TSL> 1.1375-1.15
Note: Consecutive closing (3 days) above 1.1375-1.15 zone for any reason, EURUSD may further rally up to 1.18-1.25 in the near to long term.
Today there is virtually no probability of FED rate hike and all attention will on the language of FED statement (hawkish/dovish/neutral), latest economic projection, Dot Plot forecast, forward guidance/Q&A by Yellen.
In order to justify the FED's Dec'15 rate hike, Yellen may take some hawkish stance amid improving job data, CPI but wage growth and consumer sentiment may deter the FED with ultra hawkish script.
FED may indicate that barring some "unforeseen" circumstances (like global/ China market turmoil in Jan-Feb), it may hike by 0.25% in June'16, just before the forthcoming US presidential election time.
Traditionally, FED will be in the hibernation mood in election time and after June, it may think of some action only in Dec'16, depending up on the next Govt's economic policy (Trump seems like more hawkish and Clinton on the dovish side). But, in reality, in US, such economic policy matter is highly dependent on FED/ US Senate/Cong and there may not be any big directional change, even if Trump wins.
FED basically may project only two hike (June/Dec'16) instead of four hikes in earlier dot plots, which may be seen as slightly hawkish (USD will gain strength for 1/2 hours/days and then come down).
On the other side, FED may choose not to experiment with the market before the election time as ultimately the last hike in Dec'15 (after nearly ten years) caused the global market turmoil in Jan-Feb'16 (although triggered by slump in Oil and China jitters/Yuan devaluation). No Govt will like to face a presidential election with a market turmoil !!
Also, too much strong USD will not be good for US economy also and some other economic data may be pointing towards a "mini/luxury-recession" in US too !!
In the days ahead, apart from the above factors of Oil/Commodity and China, Brexit may be a real threat for FED to take a "wait & watch" stance rather than taking any real action (verbal intervention).
China/PBOC will also continue their mini/targeted stimulus frequently and this may also increase the probability of more Yuan devaluation apart from USD outflow fears and Chinese banks NPA/NPL/recapitalization issues.
On the other side, ECB/BOJ are ready with "anything" to stimulate their economy (QQE), but it seems that central bankers are increasingly "out of ideas" for more unconventional economic policy and ultimately some appropriate "structural reform" is required to stimulate the "real street" rather than the "buy back" rally in "Wall Street" on the back of "easy money".
Thus the divergent monetary policy between FED & ECB/BOJ/PBOC will make the USD stronger wrt to almost all the G-6 currency and consequently EURUSD may drift to near parity by the end of 2016 (1.07-1.04-0.98).
If Oil is stabilized between $30-40, the present inverse correlation between EQ/Oil & safety of Yen may change and old inverse correlation of USD & EQ (i.e. strong USD may be bad for EQ in the days ahead after a temporary EQ rally).
Analytical Charts:
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