DominikStone

An incredible strengthening on the dollar pulled EUR/USD.

FX:EURUSD   Euro / U.S. Dollar
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An incredible strengthening on the dollar (on the back of a sharp rise in yields) pulled EUR/USD right back to the key near term support around 1.1820, which in effect held firm (only having been breached by a handful of pips). This test continues today and as yet again is hanging on, however the sharp deterioration in yesterday’s session which resulted in a huge bear candle shows that downside pressure is growing once more. This is reflected in the momentum indicators which have all swung lower again. A closing breach of 1.1820/1.1800 would open further weakness with the next support at 1.1715 and then what is the significant November 2017 support at 1.1550. The Daily chart shows that the market has had a couple of goes at the support around 1.1820 both yesterday and then overnight, both times the market has broadly held up. The mini reaction high at 1.1875 will be watched as an initial resistance with a near term pivot at 1.1890 and then 1.1940. Rallies are still likely to be seen as a chance to sell.
Comment: The sharp acceleration of selling of a few days ago has just begun to settle down as we head into the weekend. Yesterday’s loss of just 15 pips yesterday is all but being unwound as the Europeans head to their desks for the final time this week. Momentum indicators had threatened to take the market into spiral decline but have just begun to stabilize once more as the low of $1.1760 posted on Wednesday remains intact. However there is little real sign that the bulls are about to make a decisive comeback and this is a consolidation that looks to be just helping to unwind oversold momentum. The hourly chart shows momentum is unwinding back to levels where the sellers have tended to resume control, with the RSI back around 50/60 and the MACD back around neutral. There is a near term pivot resistance at $1.1850 and then $1.1900 making a near term sell zone, whilst the reaction high at $1.2000 is increasingly key near term.
Comment: With the dollar remaining strong this morning and the euro still pressured by Italian politics, we find the move lower on EUR/USD continuing. The pair dropped throughout the course of last week and is now well within range of a test of the key reaction low at 1.1715 from December. Momentum indicators remain solidly negatively configured, with the RSI dropping into the mid-20s. Intraday rallies continue to be sold into and old support around 1.1820 is now a basis of resistance. The daily chart shows that there is a band of initial resistance 1.1820/1.1855 now. Although the downside target of the original 400 pip top of 1.1755 has already been achieved, it does seem that there is no let up from the sellers for now and should the support at 1.1715 be broken there is little real support until the key reaction low from November at 1.1550.
Comment: There are signs that perhaps the near term strength of the US dollar is beginning to wane and the reaction during today’s session could be key. EUR/USD has been under negative pressure for a while, as support levels have been consistently breached. However, it was notable yesterday when the support of the December low at 1.1715 held to the pip before the market subsequently bounced intraday. The resulting rebound of 75 pips into the close has formed a small bull hammer reversal candlestick. It is important to say that this is almost an outlier of a positive signal on a chart that is still very negatively configured. There would need to be far more by way of recovery signals before this signal is tradable. Firstly there needs to be a second confirmation positive candle today, and early signs are not overly encouraging. Momentum indicators have been very negative. There would need to be a move above resistance at 1.1820 for there to be a trend change. Initial support at 1.1740 now protects 1.1715.
Comment: The positive impact of Monday’s rebound candle could not be sustained yesterday as the euro struggled to overcome its previous support which is now resistance around $1.1820. The subsequent formation of a mildly negative candle which has continued lower into today’s session leaves the possibility open for a retest of the near term key support at $1.1715 once more. Rallies on EUR/USD continue to be sold into and although the risk remains to the downside, all is not yet lost in this potential recovery. The reaction of the European traders this morning and into the afternoon could be key to the near term outlook. With a raft of data releases, volatility will be elevated throughout this session. The bulls will have to fight hard to hold on to $1.1715, whilst $1.1820 is a key pivot area resistance now. How the market reacts to these two levels will determine the near term direction. The balance of indicators remains negative on both daily and hourly charts.
Comment: TP1 Hit as per clearly visible level. TP2 extension still valid setup.
Comment: The euro remains under pressure as the market continues to use rallies as a chance to sell. Another strong bearish candle formed yesterday to breach the support of the December low at $1.1715 and now there is little support of any significance until the key November low at $1.1550. Momentum indicators remain negatively configured with the RSI falling back into the mid-20s. The chart shows that intraday rallies are a chance to sell, with resistance $1.1715/$1.1760 as a near term sell zone today. Key resistance is building between $1.1820/$1.1855.
Comment: The prospects for a recovery are still decent with the market having broken a five week downtrend and also begun to post positive momentum recovery signals. However the resistance around the old low at 1.1715 remains the barrier to gains and is preventing the bulls from really finding their feet again. For a third consecutive session we see the market testing higher but ultimately unable to break the resistance with a closing breach. There has been a shift in sentiment over the past week that shows through on the Daily chart too, with more positive configuration on momentum indicators. There is also a prospective near term base pattern that is forming, with a decisive move above 1.1750 needed to complete, which would imply around 230 pips of recovery. However the resistance is so far holding firm. Support of Friday’s low at 1.1615 is a higher low above 1.1505, but the bulls need to make the breakout if this is to be a sustained recovery.
Comment: The euro continues to test the initial band of resistance as the prospects of a recovery grow. A fourth positive candle in the past five sessions was completed yesterday as the bulls reacted well into the close. Yet again we therefore see the market putting pressure on the resistance between 1.1715/1.1750 which comprises of a series of day highs in the past eight sessions and the 38.2% Fibonacci retracement. The improvement on the momentum indicators continues. The Daily chat show that this has been a relatively stable period on the pair within around 100 pips of range, however a decisive move above 1.1750 would complete a base pattern breakout. The support of the spike low at 1.1615 following Non-farm Payrolls last week needs to hold for the bulls to retain the prospect of a recovery.
Comment: The surprisingly hawkish comments from the ECB’s Peter Praet yesterday drove a strong breakout through resistance at 1.1750 to continue the recovery. This move has taken the pair above the 21 day moving average (currently 1.1750) for the first time since the selling pressure really ramped up in mid-April. This breaks the shackles of a recovery which is now set to test the next resistance at 1.1820/30 today but also brings 1.2000 back into view. The strength of the recovery in the momentum indicators confirms that the near term outlook continues to strengthen. The Daily chart shows that the break above 1.1750 completed a small base pattern which gives around 230 pips of recovery target and would mean that the psychological 1.2000 area is not unrealistic. There is now support 1.1710/1.1750 to use as a near term buy zone, whilst the higher lows around 1.1640 are increasingly important now.
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