As anticipated, the FOMC decided to hike its target rate by 25bps yesterday. In consequence to this, the dollar advanced across the board and sent the shared currency aggressively lower. A number of H4 tech supports were engulfed during this bearish assault, with price concluding the day filling bids around the 1.05 handle.
To our way of seeing things, there are technical signs signaling that the rebound from 1.05 may extend higher this week. Weekly action shows price kissing the top edge of a major support area at 1.0333-1.0502 that stretches as far back as 1997! And, by the same token, daily price is also seen shaking hands with both a support coming in at 1.0520 and a neighboring Quasimodo support seen just below it at 1.0494.
Our suggestions: In spite of the EUR currently entrenched within somewhat of a downtrend at present, our desk feels, given the support structure noted above, a rotation to the upside could be on the cards.
The team has noted two potential setups:
1. Wait and see if the unit retests the 1.05 neighborhood again today. Should this come to fruition, a long from 1.0494 could be something to consider, with stops placed below the apex of the daily Quasimodo support (1.0462) at 1.0460.
2. On the assumption that the bulls remain in the driving seat from current price and bid the pair above the H4 mid-way resistance point at 1.0550, this would, at least to us, confirm upside strength. To take advantage of this move, one could either buy at market following a H4 close above this line, or conservatively wait and see if price retests 1.0550 as support and buy with lower-timeframe confirmation. This could be either a break above supply followed by a retest, a trendline break/retest or simply a collection of well-defined buying tails around the 1.0550 zone. We search for lower-timeframe confirmation between the M15 and H1 timeframes, since most of our higher-timeframe areas begin with the H4. Stops are usually placed 3-5 pips beyond confirming structures.
Data points to consider: US CPI report, Philly Fed manufacturing index and Jobless claims all set to hit the wire at 1.30pm GMT.
To our way of seeing things, there are technical signs signaling that the rebound from 1.05 may extend higher this week. Weekly action shows price kissing the top edge of a major support area at 1.0333-1.0502 that stretches as far back as 1997! And, by the same token, daily price is also seen shaking hands with both a support coming in at 1.0520 and a neighboring Quasimodo support seen just below it at 1.0494.
Our suggestions: In spite of the EUR currently entrenched within somewhat of a downtrend at present, our desk feels, given the support structure noted above, a rotation to the upside could be on the cards.
The team has noted two potential setups:
1. Wait and see if the unit retests the 1.05 neighborhood again today. Should this come to fruition, a long from 1.0494 could be something to consider, with stops placed below the apex of the daily Quasimodo support (1.0462) at 1.0460.
2. On the assumption that the bulls remain in the driving seat from current price and bid the pair above the H4 mid-way resistance point at 1.0550, this would, at least to us, confirm upside strength. To take advantage of this move, one could either buy at market following a H4 close above this line, or conservatively wait and see if price retests 1.0550 as support and buy with lower-timeframe confirmation. This could be either a break above supply followed by a retest, a trendline break/retest or simply a collection of well-defined buying tails around the 1.0550 zone. We search for lower-timeframe confirmation between the M15 and H1 timeframes, since most of our higher-timeframe areas begin with the H4. Stops are usually placed 3-5 pips beyond confirming structures.
Data points to consider: US CPI report, Philly Fed manufacturing index and Jobless claims all set to hit the wire at 1.30pm GMT.
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