USD/EUR (EUR=X) Upside Terminated
– 1.1510 in focus according to technical analysis
– ECB’s Draghi in focus at Sintra central banking event
– US Dollar will be eyeing US Fed’s Powell at same event
The Euro slumped notably lower against the US Dollar last week after the European Central Bank quashed market hopes of an initial Eurozone interest rate rise next June while the Federal Reserve hiked its own key rate for the second time this year, and some strategists say it could extend those losses this week.
Europe’s single currency had extended a fledgling recovery against the US greenback until the Thursday last week when the ECB told markets that Eurozone interest rates will remain at their current record low levels until “at least through the summer of 2019 and in any case for as long as necessary”, which proved the straw that broke the camel’s back.
Markets had previously come to believe the central bank would not only end its quantitative easing programme over coming months, but that it would also look to raise interest rates around June 2019.
Coming hard on the heels of Wednesday’s rate hike from the Federal Reserve, the ECB statement sent the Euro-to-Dollar rate down by more than 300 points to 1.1550 Friday, which is close to its lowest level since July 2017.
Downward pressure on the exchange rate was compounded by US economic data showing retail sales rising at close to double the pace that economists had forecast for the month of May. This reignited the “divergence” narrative that had seen markets bid the Dollar higher at the expense of other currencies due to faster growth and a brighter economic outlook over across the pond.
Economists are now increasingly forecasting that the US economy will expand by as much as 4% during 2018, while the European Central Bank says it expects Eurozone growth of little more than 2%.
“EUR/USD’s upside correction has terminated at the 1.1855 38.2% Fibonacci retracement and collapsed lower. Attention reverts to the recent low at 1.1510 and the 200 week moving average at 1.1416. Below 1.1415 would introduce scope to the 61.8% retracement at 1.1186. Rallies will now find the 20 day ma at 1.1702 offers initial resistance and we would expect 1.1855 to cap for a negative bias to remain entrenched,” says Karen Jones, head of technical analysis at Commerzbank.
Overall, the bias in prices is: Downwards.
The projected upper bound is: 1.17.
The projected lower bound is: 1.14.
The projected closing price is: 1.16.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 21 white candles and 29 black candles for a net of 8 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.
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.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 14.1604. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 6 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 37.29. 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 buy 13 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 -118.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 4 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 0 period(s) ago.
Rex Takasugi – TD Profile
FOREX EUR= closed down -0.001 at 1.160. Volume was 99% below average (consolidating) and Bollinger Bands were 12% narrower than normal.
Open High Low Close Volume___
1.161 1.161 1.158 1.160 1,514
Short Term: Oversold
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 1.17 1.19 1.20
Volatility: 13 9 9
Volume: 144,060 136,127 123,445
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.
FOREX EUR= is currently 3.4% below 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 5 periods.
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