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8 May 2013
Forex: EUR/USD unable to find direction as global equities continue higher
The EUR/USD closed the session up 6 pips at 1.3078. German Factory Orders print came in above expectations at 2.2% vs. -0.5% estimates which initially helped the pair trade as high as 1.3131 earlier in the day. However, some analysts are pointing towards the lack of consistency in the data as a main catalyst for why the Euro showed no follow through. Economic data in the coming European session will be focused on German Industrial Production, due out at 10:00GMT. The US Session will also be quiet with major releases scheduled.
According to analysts at Rabobank, “In Europe, Factory Orders received by German producers rose 2.2% MoM in March. This is stronger than a fall of -0.5% expected and builds on a similar 2.2% monthly increase in February. As we discussed here yesterday, these orders can be volatile month-to-month so quarterly trends can be more insightful”
The general theme of global stock prices having a much more clear and defined trend then the foreign exchange market has been going on for quite some time now. Many market participants are likely getting frustrated at the lack of overall movement in the EUR/USD, particularly after last week when so many economic catalysts failed to break the pair out of its recent range. Another factor which is helping to keep the pair sideways is the recent head line driven price action by central bank officials which seems to hit the wires when participants least expect it.
According to Kathy Lien of BK Asset Management, “Over the past week, all of the action has been in equities. U.S. stocks powered to new record highs while currencies consolidated quietly. The U.S. Part of the reason why currencies have not enjoyed the same type of strong trend as equities is because this is a QE driven rally and with central banks around the world engaged in new rounds of easing, the availability of more stimulus has been ambiguously positive for stocks.’
She went on to add, “Unfortunately these simultaneous easing programs has also clouded the outlook for currencies as investors wonder which central bank will win the race to debase. The rally in stocks and consolidation in currencies also tells us that investors are much more interested in joining the trend in equities than try to figure out whether support or resistance will be broken in currencies. Eventually this will change but for the time being we can't ignore the fact that the big moves are happening in other markets.”
From a technical perspective, it’s basically the same story we’ve seen since early April. Neither side can generate enough momentum to break through the upper or lower end of the large trading range. Both short term moving averages the RSI (14) are also in neutral set up. To make matters more confusing, the longer term time frames (weekly/month charts) which can usually help clear up the picture are also in disagreement. The weekly chart is setting up what could be a massive head and shoulders pattern (bearish), while the monthly chart formed a bullish engulfing candle in April. Until the pair is able to establish direction and offer a better risk/reward trade, expect conditions to remain choppy.
According to analysts at Rabobank, “In Europe, Factory Orders received by German producers rose 2.2% MoM in March. This is stronger than a fall of -0.5% expected and builds on a similar 2.2% monthly increase in February. As we discussed here yesterday, these orders can be volatile month-to-month so quarterly trends can be more insightful”
The general theme of global stock prices having a much more clear and defined trend then the foreign exchange market has been going on for quite some time now. Many market participants are likely getting frustrated at the lack of overall movement in the EUR/USD, particularly after last week when so many economic catalysts failed to break the pair out of its recent range. Another factor which is helping to keep the pair sideways is the recent head line driven price action by central bank officials which seems to hit the wires when participants least expect it.
According to Kathy Lien of BK Asset Management, “Over the past week, all of the action has been in equities. U.S. stocks powered to new record highs while currencies consolidated quietly. The U.S. Part of the reason why currencies have not enjoyed the same type of strong trend as equities is because this is a QE driven rally and with central banks around the world engaged in new rounds of easing, the availability of more stimulus has been ambiguously positive for stocks.’
She went on to add, “Unfortunately these simultaneous easing programs has also clouded the outlook for currencies as investors wonder which central bank will win the race to debase. The rally in stocks and consolidation in currencies also tells us that investors are much more interested in joining the trend in equities than try to figure out whether support or resistance will be broken in currencies. Eventually this will change but for the time being we can't ignore the fact that the big moves are happening in other markets.”
From a technical perspective, it’s basically the same story we’ve seen since early April. Neither side can generate enough momentum to break through the upper or lower end of the large trading range. Both short term moving averages the RSI (14) are also in neutral set up. To make matters more confusing, the longer term time frames (weekly/month charts) which can usually help clear up the picture are also in disagreement. The weekly chart is setting up what could be a massive head and shoulders pattern (bearish), while the monthly chart formed a bullish engulfing candle in April. Until the pair is able to establish direction and offer a better risk/reward trade, expect conditions to remain choppy.