By Lukman Otunuga, Research Analyst, FXTM
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The EURUSD has surrendered its gains from Thursday after the euro bears were provided with encouragement following Mario Draghi repeating his dovish view on the Eurozone economy during his conference in Frankfurt.
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The ECB president once again made clear the possible need for increased stimulus to support the European economy which encouraged sellers and sent the EURUSD back below 1.07. Investors in particular saw Draghi’s remarks about the central bank doing what it must to boost dangerously low inflation in Europe as an indication that the ECB is likely to further monetary easing. With expectations increasing that the ECB is close to taking further action, the EURUSD is likely to remain depressed and opened to further losses.
Technically, the EURUSD is bearish and the continual strong divergence in both monetary and economic sentiment between the United States and Europe has consistently encouraged sellers to harass this pair. Prices are trading below the daily 20, 50 and 200 SMA and the MACD has crossed to the downside. The previous resistance at 1.075 may invite an opportunity for sellers to send prices towards 1.055.
Dollar weakness offered Gold bulls a false lifeline and as a result the commodity appreciated almost $20 from its five-year lows this week. The yellow metal remains fundamentally bearish and completely dictated by US interest rate expectations in which the Fed futures predict a near 70% likelihood of the Federal Reserve acting in December. Gold remains vulnerable and open to further losses as expectations mount on the Fed taking action next month, and if these expectations materialise then this zero yielding metal may decline back towards $1050 and lower.
Next week, the focus will be directed towards the European PMI releases which may offer clarity on the level of optimism purchasing managers have on the economic health of the European manufacturing sector. The PMI results have been following a downwards trajectory and if this pattern follows, then more pressure may be directed on the ECB to provide further monetary easing as a means of boosting European economic growth and optimism.
NZDCHF: The NZDCHF is technically bullish. Prices are trading above the daily 20 SMA and the MACD has crossed to the upside. A break above the 0.6700 resistance may open a path to the next relevant level at 0.6850.
GBPSEK: The GBPSEK is technically bullish as there have been higher highs and higher lows. Prices are trading above the daily 20 and 50 SMA with the MACD pointing to the upside. A solid break above 13.300 may invite an opportunity for a further incline towards 13.400.
AUDJPY: The AUDJPY is technically bullish. Prices have hit the 88.50 resistance and a break above this level may open a path to 89.50.
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