EUR/USD spot: 1.0556
Support: 1.0492, 1.0460, 1.0367
Resistance: 1.0803, 1.0680, 1.0602
Strategy:
Despite a concerted effort last week, the Euro bulls failed to get the pair above 1.069, and it fell sharply back to 1.06. Once that level gave way, the market fell to just below 1.0492, its lowest level since early January. The overall direction remains down, however the market is beginning to question the amount of dollar strength that has been priced in.
The FOMC meeting minutes released on 22nd February, showed a committee leaning strongly toward higher rates – this is in line with what the market expected.
The news flow driving the EUR/USD should be coming thick and fast over the next few months. In America tax cuts and budget proposals will dominate the outlook, while elections in France and Germany will keep markets guessing about the future of the European economy.
The pair has been moving sideways since early 2015, though the bias is for a break to the downside.
The weekly chart indicates that the market can move a lot higher and yet remain bearish. On the 4-hour chart, the 1.0602 level has shown itself to be key. Resistance from the downtrend is now close to this level – that’s even more reason for it to hold, and if it doesn’t it will be significant. A move above this level will see the market target the top of the range at 1.0803, though it may require some work to get there.
Short term traders should therefore use 1.06 as a pivot and remain bearish below this level, and bullish above.
The pair are trading in a roughly defined channel, targeting levels not seen since 2002. Price action is not decisive, indicating growing uncertainty.
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