EUR/USD heads upwards after Merkel wins
Morning outlook - EUR/USD heads upwards after Merkel wins
Although initially markets were positively anticipating the upcoming Draghi speech at Trinity College, but the subsequent reaction led to quite rapid recovery of the Dollar on Friday.
To certain extent, such bearish movement could be related to anticipation of the German Parliamentary elections. However, as soon as it became clear that Merkel managed to retain her post, the Euro started restoring previously lost positions.
From technical perspective, this upside momentum is likely to be neutralized by a combined resistance formed by the 55-, 100- and 200-hour SMAs together with the weekly PP at 1.1947.
On the other hand, Draghi's testimony at the European Parliament might create a new short-term volatility in the markets, which could give the pair a necessary impulse to bypass those barriers. In the opposite case, the rate is likely to fall to the bottom edge of a dominant ascending channel.
P.S.
In result of the various fundamental events that happened during the previous week, the currency pair has formed a symmetrical triangle whose upper boundary represents a part of a junior descending channel and the lower boundary represents a part of a senior ascending channel.
Accordingly, in the end of this or beginning of the next week the pair is expected to make a breakout from this pattern. This result will reveal what trend has prevailed and in which direction the currency rate would move in the nearest perspective (clearly seen on daily chart)
Although initially markets were positively anticipating the upcoming Draghi speech at Trinity College, but the subsequent reaction led to quite rapid recovery of the Dollar on Friday.
To certain extent, such bearish movement could be related to anticipation of the German Parliamentary elections. However, as soon as it became clear that Merkel managed to retain her post, the Euro started restoring previously lost positions.
From technical perspective, this upside momentum is likely to be neutralized by a combined resistance formed by the 55-, 100- and 200-hour SMAs together with the weekly PP at 1.1947.
On the other hand, Draghi's testimony at the European Parliament might create a new short-term volatility in the markets, which could give the pair a necessary impulse to bypass those barriers. In the opposite case, the rate is likely to fall to the bottom edge of a dominant ascending channel.
P.S.
In result of the various fundamental events that happened during the previous week, the currency pair has formed a symmetrical triangle whose upper boundary represents a part of a junior descending channel and the lower boundary represents a part of a senior ascending channel.
Accordingly, in the end of this or beginning of the next week the pair is expected to make a breakout from this pattern. This result will reveal what trend has prevailed and in which direction the currency rate would move in the nearest perspective (clearly seen on daily chart)
Comment:
EUR/USD tries to break medium-term channel
As it was expected, the Dollar continued to appreciate against the Euro and reached the bottom edge of medium-term descending channel yesterday. In fact, a reaction of traders on release of the CB Consumer Confidence even pushed the pair a little bit outside the pattern. But the subsequent Janet Yellen’s speech returned it back to the 1.18 area.
Although bears are relentlessly trying to push the rate to the south, from trade patterns perspective a rebound should follow. In favour of this scenario speaks the fact that the pair is located at the intersection of lower boundaries of two descending channels as well as the weekly S2 at 1.1774. On the other hand, the 55- and 100-hour SMAs most probably will try to block any attempt to return back to the 1.1861 levels.
As it was expected, the Dollar continued to appreciate against the Euro and reached the bottom edge of medium-term descending channel yesterday. In fact, a reaction of traders on release of the CB Consumer Confidence even pushed the pair a little bit outside the pattern. But the subsequent Janet Yellen’s speech returned it back to the 1.18 area.
Although bears are relentlessly trying to push the rate to the south, from trade patterns perspective a rebound should follow. In favour of this scenario speaks the fact that the pair is located at the intersection of lower boundaries of two descending channels as well as the weekly S2 at 1.1774. On the other hand, the 55- and 100-hour SMAs most probably will try to block any attempt to return back to the 1.1861 levels.
As it was expected, a combination of the 55-, 100- and 200-hour SMAs around the weekly PP, which is located at the 1.1948 level, did not allow the rate to surge any further. Because of the rebound, most of the previous trading session movement of the pair was guided by bears, which pushed it out of a symmetrical triangle. In other words, a long-term dominant ascending channel was broken.
Such outcome indicates that today the currency rate is likely to continue to slip to the bottom, trying to reach the lower trend-line of a three week long descending channel. And the fact that it located below the monthly PP at 1.1881 and the weekly S1 at 1.1861 as well as the above moving averages, only supports this scenario. On the other hand, there is a need to take into account an effect from Yellen's speech that might either strengthen or weaken the buck.