Morning Market Update – Being Cautious ahead of ECB

EUR/USD was unable to gather strength despite the USD’s weakness. This became the worst performer on 5/9. The pair declined to previous lows during the US session and managed to bounce off the dynamic support provided by the 50 MA in the hourly chart. The price is trading within a minor channel with support levels at 1.1909, 1.1906, 1.1892 and 1.1883. EUR/USD has the potential to slide below if 1.1883 is breached and this would eventually draw the pair close to 1.1830. Today’s market open is closely equal to the open on 1st Sept. As the history tends to repeat itself, we may see the price head lower with an up spike. Yesterday’s data was not convincing as the final EU services and composite PMIs were below expectations but managed to stay in line with solid growth. On the other hand, the retail sales had its biggest drop this month and was down by 0.3%.

Elsewhere, the US has also had a major negative release on the factory orders which experienced a biggest drop in three years. EUR/USD performed low even with this negative release from US. The real reason behind this low liquidity is that traders around the world are more caution not to get eaten up as they all await the ECB’s monetary policy meeting that is scheduled next Thursday.

Technical indicators remain directionless with no clear signals of the market behavior. The four hours chart show a slight increase with new recruits but it is not enough to hold off the bears in case of a failure to taper the policy this year. Overall the bulls are still in control of the market but the volume is increasingly drying up which only means that the net longs are slowly diminishing while the short traders are coming in for a cover up at all major and minor resistances.