Market Analysis

EURUSD: Technicals and Expiries

Traders might have assumed that the decision of the Italian government to set a budget deficit goal of 2.4 percent for the years 2019-21, well above what analysts had originally expected, wouldn’t lend support to the euro. Indeed EURUSD spent the Asian session in the lower levels of the range of the last 24 hours. Yet EURJPY rose. Despite market qualms about Italy’s budget plans, traders in Asia embraced a risk on approach, possibly as a response to apparently successful talks between US President Donald Trump and Japanese Prime Minister Shinzo Abe that saw a substantial rally in Japan’s stock market on Friday. Risk appetite, by feeding through into broad yen weakness helped give EURJPY something of a lift, but traders in Europe might take some convincing that a slight bounce in EURJPY, essentially derived from yen weakness, not euro strength, means the euro’s more general woes are necessarily over.  The 100-day moving average, currently at 1.1653, may exercise some early technical influence on EURUSD in Europe today, while traders may also be mindful of the 55-day moving average at 1.1618. Traders might also wish to bear in mind that there are very sizeable option expiries on Friday (1500h UK time) that may also influence the price action until expiry time. In EURUSD, according to analysts at IFR, there are 4.25 billion euros of expiries at 1.1630 today, 2.78 billion euros in the 1.1640-75 range, and 1.46 billion euros at 1.1700.

by Neal Kimberley, External Currency Analyst