Why EUR/USD traders shouldn’t write off the pair quite yet!
After Fed Chairman Jerome Powell’s heavy hint that the central bank would announce its plans for tapering asset purchases at its next meeting in November, the world’s most widely-traded currency pair is poised to finish the week just above key support in the 1.1670-1.1700 range.
Since the start of Q3, EUR/USD has carved out a well-defined range between support near 1.1700 and resistance up at 1.1900, but that range may be at risk of breaking as soon as next week. As we’ve noted before, market volatility tends to be cyclical, so periods of low volatility and rangebound trade tend to be followed by high-volatility directional movements, and after three months of oscillating around in the same 200-pip range, the stage is set for a sharp move higher or lower in EUR/USD.
With interest rate differentials and central bank expectations pointing to the potential for strength in the world’s reserve currency, a bearish breakdown may be more likely for EUR/USD. If we do see a confirmed breakdown, the unit could quickly fall to its 14-month low in the 1.1600 area, with potential for even more downside if that floor gives way.
Meanwhile, an eventual bullish breakout above 1.1900 could quickly expose previous-support-turned-resistance at the psychologically significant 1.2000 level and could eventually open the door for the pair to test the April highs above 1.2200.
It’s often said that the market tries to make fools of as many traders as possible, and with most traders writing off the potential for any meaningful volatility in the planet’s most widely-traded pair, a breakout and rapid directional move would make them look foolish indeed!
Since the start of Q3, EUR/USD has carved out a well-defined range between support near 1.1700 and resistance up at 1.1900, but that range may be at risk of breaking as soon as next week. As we’ve noted before, market volatility tends to be cyclical, so periods of low volatility and rangebound trade tend to be followed by high-volatility directional movements, and after three months of oscillating around in the same 200-pip range, the stage is set for a sharp move higher or lower in EUR/USD.
With interest rate differentials and central bank expectations pointing to the potential for strength in the world’s reserve currency, a bearish breakdown may be more likely for EUR/USD. If we do see a confirmed breakdown, the unit could quickly fall to its 14-month low in the 1.1600 area, with potential for even more downside if that floor gives way.
Meanwhile, an eventual bullish breakout above 1.1900 could quickly expose previous-support-turned-resistance at the psychologically significant 1.2000 level and could eventually open the door for the pair to test the April highs above 1.2200.
It’s often said that the market tries to make fools of as many traders as possible, and with most traders writing off the potential for any meaningful volatility in the planet’s most widely-traded pair, a breakout and rapid directional move would make them look foolish indeed!