Euro: USD/EUR (EUR=X) Pullback in Uptrend After Hitting 1.12

Euro: USD/EUR (EUR=X) Pullback in Uptrend After Hitting 1.12

Euro: USD/EUR (EUR=X) Pullback in Uptrend After Hitting 1.12

The markets don’t seem to think a 50-basis point rate cut is sufficient and are considering the possibility of another rate cut from the Federal Reserve at the scheduled meeting in just under two weeks.

The Fed delivered an emergency rate cut earlier this week in an attempt to curb the negative impact expected on the economy from the Coronavirus. The initial reaction in the markets appeared to be fear as risk aversion kicked in, however, equities have since rallied to fresh highs for the week.

The Futures markets pared back expectations for another rate cut next month shortly after the emergency rate cut, but sentiment has shifted, and the markets want more from the Fed. The latest CME data indicates a 30% probability of another 25 basis points worth of cuts at the Fed meeting on March 18.

The Bank of Canada slashed its interest rate by half a basis point yesterday. The BoC is one of the few banks around the world that have not eased policy over the last few years. The last policy action from the BoC, prior to yesterday’s, was a rate hike in September 2018. Earlier in the week, the Reserve Bank of Australia reduced its interest rate by a quarter percent.

Out of the US yesterday, ADP non-farm payroll figures showed a larger than expected increase in the number of employed people during February. ADP reported an increase of 183 thousand people versus an expected 170 thousand people. However, there was a notable downward revision for January to show 209 thousand extra jobs versus the initially reported 291 thousand additional jobs.

What stands out the most in recent EUR/USD price action is the upward momentum. Normally, yesterday’s downturn may have provided a technical signal for a reversal lower, however, considering the recent momentum, there is little reason to believe the pair has reversed.

Another consideration when it comes to assessing the trend is the price relative to its 200-day moving average. The pair easily sliced through it earlier in the week and dips towards the indicator have now twice been bought.

The market often likes to make a run at stops and an obvious area where these might currently be sitting is above 1.1225 resistance. This resistance level triggered a turn at the start of the year to reverse the bullish recovery that took place through the fourth quarter.

To the downside, the 200-DMA, currently at 1.1098 offers support in the session ahead.

Bottom Line

  • EUR/USD retreated yesterday after a four consecutive day rally. However, with the markets showing expectations for more rate cuts, the dollar remains at risk of more losses.
  • Stops may have accumulated above a major resistance level at 1.1225. The market may try to drive the pair towards this area.

Technical Indicators

Overall, the bias in prices is: Upwards.

The projected upper bound is: 1.13.

The projected lower bound is: 1.11.

The projected closing price is: 1.12.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 8 white candles and 1 black candles for a net of 7 white candles. During the past 50 bars, there have been 24 white candles and 25 black candles for a net of 1 black candles.

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 84.8486. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 9 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 69.95. 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 1 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 119.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 10 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 buy 7 period(s) ago.

Rex Takasugi – TD Profile

FOREX EUR= closed up 0.005 at 1.119. Volume was 14% above average (neutral) and Bollinger Bands were 138% wider than normal.

Open     High      Low     Close     Volume___
1.113 1.120 1.112 1.119 74,775
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 1.10 1.10 1.11
Volatility: 8 7 6
Volume: 94,285 69,925 72,555

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 0.8% above its 200-period moving average and is in an upward 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 bullish on EUR= and have had this outlook for the last 3 periods. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.

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