Euro: USD/EUR (EUR=X) Limited Bullish Potential

Euro: USD/EUR (EUR=X) Limited Bullish Potential

Euro: USD/EUR (EUR=X) Limited Bullish Potential

EUR/USD consolidates as the Federal Reserve ramps up its effort to support the US economy, but the exchange rate may continue to give back the advance from the 2017 low (1.0340) as the US Dollar benefits from the flight to safety.

EUR/USD REBOUNDS AS FED PLANS TO PURCHASE CMBS BUT WILL IT LAST?

EUR/USD bounces back from a fresh yearly low (1.0636) as the Federal Open Market Committee (FOMC) announces three new credit facilities along with plans to purchase commercial mortgage-backed securities (CMBS) to combat the economic shock generate by the coronavirus.

Image of Federal Reserve announcement

At the same time, the FOMC appears to be on track to unveil more measures as the central bank “expects to announce soon the establishment of a Main Street Business Lending Program to support lending to eligible small-and-medium sized businesses.”

It remains to be seen if other major central banks will follow suit as International Monetary Fund Managing (IMF) Director Kristalina Georgieva warns of a global slowdown in 2020, with the group anticipating “a recession at least as bad as during the global financial crisis or worse.”

The supply/demand shock may force major central banks to implement more non-standard measures as interest rates sit near zero, but the extraordinary measures may do little to curb the flight to safety amid the growing number of COVID-19 cases.

In turn, the US Dollar may continue to benefit from the current environment as the IMF states that “investors have already removed US$83 billion from emerging markets since the beginning of the crisis, the largest capital outflow ever recorded,” and the recent rebound in EUR/USD may prove to be short lived as market participants scale back their appetite for risk.

Technical Indicators

Overall, the bias in prices is: Downwards.

By the way, prices are vulnerable to a correction towards 1.10.

The projected upper bound is: 1.10.

The projected lower bound is: 1.06.

The projected closing price is: 1.08.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 23 white candles and 26 black candles for a net of 3 black candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 30.2218. This is not an overbought or oversold reading. The last signal was a buy 0 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 39.58. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 11 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -77. This is not a topping or bottoming area. The last signal was a buy 1 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 6 period(s) ago.

Rex Takasugi – TD Profile

FOREX EUR= closed up 0.001 at 1.079. Volume was 57% below average (consolidating) and Bollinger Bands were 185% wider than normal.

Open     High      Low     Close     Volume___
1.079 1.082 1.076 1.079 32,903
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 1.09 1.10 1.11
Volatility: 17 12 8
Volume: 133,752 91,417 76,316

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX EUR= is currently 2.6% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of EUR= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on EUR= and have had this outlook for the last 3 periods.

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