Trading opportunities for currency pair: the euro/dollar has slid to the trend line. From here we could see a bounce since Monday’s movements usually go against Friday’s. The bounce level will tell us how the sellers are set up. A growth to 1.0938 means we should prepare for a break through 1.0985 and then 1.1025.
Expectations that the ECB will extend its program of easing monetary policy will put pressure on the euro until March. Due to this, a break of 1.0800 and a strengthening of the price under 1.0775 (daily candle’s close) means we should consider the euro falling all the way to 1.0630. A growth above 1.0886 will halt any fall.
Background
The last EUR/USD idea I made came out on 7th December. At its publication, the euro/dollar was trading at 1.0875. I made the review when the euro/dollar rate bounced from 1.0518 after the ECB convened and Mario Draghi held a press conference.
The euro/dollar and euro/pound formed a double bottom on the weekly timeframe and so I expected the euro to strengthen to 1.1178 in accordance with an upward triangle.
The euro/dollar formed an upwards triangle much quicker than I had expected and it ended up really compact. It was one figure short of reaching the sell zone. The pair switched into a sideways and reached a 1.1059 maximum at which the euro still sits presently.
Current situation
After Draghi held his press conference on 21st January, the euro ended up under pressure. Draghi hinted at monetary stimulus being extended. Uncertainty on the stock markets persists, only, running from risky assets has upped demand for euros and yen.
The US FOMC kept interest rates at 0.25% – 0.50% on Wednesday. The committee had called the risks to the economy and inflation balanced in December.
The euro strengthened against the dollar to 1.0967 on Thursday. In Asia on Friday it weakened to 1.0882. Sales were caused by a decision from the Bank of Japan to introduce negative interest rates. The euro bulls tried to break the trend line but didn’t manage it. After US GDP data for Q4 came out, the rate dropped to 1.0809.
