Talking Points:
- EUR/USD Sellers took advantage of higher prices after the ECB, but 1.12 holds at the moment
- Draghi comments might be indicative of potential changes to QE strategy
- ZEW survey ahead might shed light on economic environment post Brexit
The EUR/USD is nudging lower, in apparent indecision, after the pair found support above the 1.12 figure following the ECB policy decision, which saw the pair reject from the 1.13 handle.
ECB President Mario Draghi hinted at a potential change to QE implementation, but participants seemed to have waited for something clearer for any real conviction.
The Euro-Zone ZEW Survey is in focus today for the pair, and could shed light on developments in the Euro-Zone following the Brexit vote.
Against this backdrop we will form our outlook and look to find short term trading opportunities using different tools such as the Grid Sight Index (GSI) indicator.
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The September ZEW Survey is in focus today for the pair, and could help shed light on the economic environment following the Brexit vote.
The initial reaction following the vote saw a plunge in the survey on Brexit related uncertainty, presumably against the backdrop of worries on export prospects and the stability of the European banking and financial system.
With that said, the latest survey saw a boost to confidence as worries eased somewhat in the short term, both in the Euro-Zone and the UK– and the survey is expected to indicate an increase today as well.
Data in the Euro-Zone has deteriorated compared to consensus forecasts (according to Citi Surprise Index), implying a potential miss in today’s numbers.
With that said, the ZEW numbers seem to have relatively reduced impact on the Euro lately, implying that a significant miss might be required to shake the pair.
Other developments could prove more significant, as the last two trading days saw large swings with global bonds falling, apparently pushing stocks lower as well, potentially against the backdrop of ECB inaction and possibly a BOJ policy shift.
ECB President Mario Draghi hinted at a potential change to QE implementation, but participants seemed to have waited for something clearer.
Indices did recover sharply, but if a similar pattern emerges, currencies such as the US Dollar, Yen and Euro could remain supported, potentially implying range bound trading conditions for the pair.
EUR/USD Technical Levels:
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We use volatility measures as a way to better fit our strategy to market conditions. The Euro is expected to be the least volatile major currency versus the US Dollar based on 1-week and 1-month implied volatility measures (besides the CHF).
In turn, this might suggest that range bound trading plays may be appropriate ahead.
EUR/USD 30-Min Chart (With the GSI Indicator): September 13, 2016
(Click to Enlarge)
The EUR/USD is trading above potential support at 1.1220, with GSI calculating higher percentages of past movement to the upside in the short term.
The GSI indicator above calculates the distribution of past event outcomes given certain momentum patterns. By matching events in the past, GSI describes how often the price moved in a certain direction.
You can learn more about the GSI here.
Other support levels to watch in the short term might be 1.1200, 1.1180, the area above 1.1150 and 1.1136.
Levels of resistance may be 1.1250, 1.1275, 1.1300, and 1.1325.
We generally want to see GSI with the historical patterns significantly shifted in one direction, which alongside a pre-determined bias and other technical tools could provide a solid trading idea that offer a proper way to define risk.
We studied over 43 million real trades and found that traders who successfully define risk were three times more likely to turn a profit.
Read more on the “Traits of Successful Traders” research.
Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 39.5% of traders are long the EUR/USD at the time of writing, offering a long bias on a contrarian basis.
You can find more info about the DailyFX SSI indicator here
--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com
To contact Oded Shimoni, e-mail oshimoni@dailyfx.com
Follow him on Twitter at @OdedShimoni
