The economic calendar is taking a breather today but will return with bang tomorrow. Market participants are looking forward to two major central meetings as the Bank of Japan and especially the European Central Bank take centre stage.
The euro continues to defy gravity. The single currency is up sharply against all of its major rivals, including the pound which took a beating despite stronger UK inflation figures released this morning.
The European Central Bank’s large bond buying programme appears to be finally working its magic. Inflation is on the rise, unemployment is falling and the economic bloc is – believe it or not – growing, all thanks to years of zero interest rates, several versions of bond purchases programme and a resulting weak currency.
EURUSD recently broke below its descending triangle support at 1.1130 and has dipped to a low of 1.0988 before showing signs of a pullback. Applying the Fib tool on the latest swing high and low shows that the 61.8% Fibonacci retracement level lines up with the broken support, which might now hold as resistance.
European stock markets started this last day of the month and quarter sharply lower as concerns over Deutsche Bank intensified, which undermined sentiment in the financial sector once again.
It hasn’t been a great start for global equities in this last week of September, with European indices dropping between 1.0 to 1.5 per cent during Monday’s morning session, mirroring a similar performance in Chinese and Japanese markets overnight.
Bad news is good news for the markets that rely on central banks’ support. And so it proved again this morning’s as the latest European data disappointed expectations, yet the major stock indices rallied as if everything was just fine.
Last week’s bearish engulfing candle for gold on the weekly chart appears to have had some follow through at the start of the new trading week, as the precious metal fell victim to a renewal of risk appetite as most global equity markets made fresh monthly highs, and the S&P and DOW soaring into new high ground.
EURUSD seems to have bullish momentum on its side at the moment, as price is moving inside an ascending channel and bouncing off support. A test of the channel resistance at 1.1600 could be underway but there’s nearby resistance at the top of a longer-term range around 1.1450.
After selling off in the past few days, EURUSD is making a correction to the 38.2% Fibonacci retracement level. This coincides with a broken support level around the 1.0950 minor psychological level and the 200 SMA resistance, which could allow the downtrend to resume.
