Market Drivers - Currencies

Market plays a waiting game

EURUSD (SELL): Sideways in the market.EURCHF (SELL): Strong resistance at 200-day moving average.EURSEK (SELL): Trades at the top of a 2-year trend line.

EURUSD (SELL): In the short term, the market still trades in a rising trend channel. We expect that the cross rate is close to the top. Over the past two weeks, we have traded in a very narrow range and we expect that the market will breach on the downside. We will see this week’s big trigger on Thursday, namely the ECB’s interest-rate meeting; the market is playing a waiting game and therefore we do not expect it to move by more than +/-1% until the outcome of the meeting is known.

EURCHF (SELL): Yesterday the market traded just above the 200-day moving average. We expect that both the trend line and the 200-day moving average will offer resistance, i.e. we believe the appreciation is over and that the market will fall to 128.50. We recommend that investors use the options market if they are concerned whether the resistance will last or not.

EURSEK (SELL): The market again trades at the upper 2-year trend line. We have heard that many foreign investors (in the UK and the US) have sold SEK positions. We expect that the Swedish economy will still be among the strongest ones and that Riksbanken will raise its rate another three times this year. We expect the upper trend line to hold firm. Strong resistance is offered at 903-904. Watch out whether speculators will try to take out weak stops.

EURGBP (NEUTRAL): GBP tends to trend and therefore investors should watch out whether 87.60 is breached; if that happens, it will most likely signal a decent appreciation of pound sterling. Today’s PMI figures may be the triggering factor.

Today’s most important events:

10:30 PMI Service (GBP)

16:00 ISM Service (USD)

ISM service from the US; consensus points to 59.9 against 59.7 last time

Chart of the day: EURSEK

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