IDEA 18: A Strong case for USD strength
Hi traders. This week is definitely not short on developments for the EUR/USD pair.
I believe the USD is poised for more gains after today's FOMC January 2024 meeting minutes.
The message was clear: the Federal Reserve is very concerned about cutting rates too soon.
One may also pose the question whether we may see another wave of inflation with the current disruption in logistics and supply chains after most European shipping companies have suspended operations utilizing the Suez Canal and the Red Sea. And the price of crude is trending up as well. Yes, the USA is a long distance away from the Middle East conflicts. However, we have already witnessed the aftermath of the COVID19 pandemic in the form of significant global inflation that is still not under control. And of course the effect of Russian sanctions on the price of energy. Sailing around the Cape of Good Hope is not a cheap alternative.
On the technical side I have included information on the charts.
The most important piece of the puzzle is the Dollar Index. Although the price has decline in tandem with EUR appreciating over the last 6 trading sessions, both asset classes have reached respective support/resistance levels. USD is at long-term resistance turned support at 103.82 going back to 2017 after 2/2/24 USD payrolls.
EUR is encountering resistance at the same weekly breakdown level after 2/2/24.
USD positive indicators:
THE DOLLAR INDEX HAS BOUNCED OFF:
the resistance/now support level at 103.82
the base line of the Ichimoku and is still above the cloud
the EMA 26D
RSI, Stochastic and Williams %R (one of my favorite indicators on all time frames), have reached a neutral zone at 50ish.
The 100/20/10/7 MA’s are comfortably above the MA 200D
Also, an inside candle on the EUR/USD daily chart.
EURO NEGATIVE INDICATORS:
Price has run into the weekly breakdown level of 1.0845 with divergence on the daily chart. RSI is trending down but higher daily highs. A daily high of 1.0839 so far…
Wage index for 4th quarter contracted from 4.7% to 4.5%
CPI print on Friday projected to be trending lower. But let’s see first.
You may ask why the EUR appreciated after the FOMC minutes. Simple. The 1.0839 print was during the overlap of USA/European/UK trading sessions. It is probably Asian traders positioning after the end of the Chinese New Year celebrations. I won't be surprised if European and UK traders attempt the 1.0845 level later tonight but once again...let's see.
This idea contains a lot more information and opinions than I usually publish but I believe it is a great opportunity to short EUR/USD below 1.0845-56 and especially EURO negative after a break of 1.0761.
Good luck.
I believe the USD is poised for more gains after today's FOMC January 2024 meeting minutes.
The message was clear: the Federal Reserve is very concerned about cutting rates too soon.
One may also pose the question whether we may see another wave of inflation with the current disruption in logistics and supply chains after most European shipping companies have suspended operations utilizing the Suez Canal and the Red Sea. And the price of crude is trending up as well. Yes, the USA is a long distance away from the Middle East conflicts. However, we have already witnessed the aftermath of the COVID19 pandemic in the form of significant global inflation that is still not under control. And of course the effect of Russian sanctions on the price of energy. Sailing around the Cape of Good Hope is not a cheap alternative.
On the technical side I have included information on the charts.
The most important piece of the puzzle is the Dollar Index. Although the price has decline in tandem with EUR appreciating over the last 6 trading sessions, both asset classes have reached respective support/resistance levels. USD is at long-term resistance turned support at 103.82 going back to 2017 after 2/2/24 USD payrolls.
EUR is encountering resistance at the same weekly breakdown level after 2/2/24.
USD positive indicators:
THE DOLLAR INDEX HAS BOUNCED OFF:
the resistance/now support level at 103.82
the base line of the Ichimoku and is still above the cloud
the EMA 26D
RSI, Stochastic and Williams %R (one of my favorite indicators on all time frames), have reached a neutral zone at 50ish.
The 100/20/10/7 MA’s are comfortably above the MA 200D
Also, an inside candle on the EUR/USD daily chart.
EURO NEGATIVE INDICATORS:
Price has run into the weekly breakdown level of 1.0845 with divergence on the daily chart. RSI is trending down but higher daily highs. A daily high of 1.0839 so far…
Wage index for 4th quarter contracted from 4.7% to 4.5%
CPI print on Friday projected to be trending lower. But let’s see first.
You may ask why the EUR appreciated after the FOMC minutes. Simple. The 1.0839 print was during the overlap of USA/European/UK trading sessions. It is probably Asian traders positioning after the end of the Chinese New Year celebrations. I won't be surprised if European and UK traders attempt the 1.0845 level later tonight but once again...let's see.
This idea contains a lot more information and opinions than I usually publish but I believe it is a great opportunity to short EUR/USD below 1.0845-56 and especially EURO negative after a break of 1.0761.
Good luck.
Comment:
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Comment:
Stop on the entire position at 1.0910. Will reassess closer to German GDP print tonight.