EURO under pressure - Key element to watch
Updated
EURO under pressure - Key element to watch
Context:
Since 2000 EUR/USD is evolving between 0,82 and 1,60 providing two clear floor and cap level following the trend of global macro economy and the strategies deployed in the differents major central banks.
The last past weeks following the decision to lower the Quantative Easing, the different actions took in the world in order to control the inflation and the good figure confirming the pursuit of the accumulation of the growth (even slower than last year) in the develop countries - The consensus for the Euro were quiet clear => main research highlighted 1,08/1,12 as strong support area and 1,18/1,23 as strong resistance for a further trading range without significant element for EUR or USD to take significant advantage regarding Growth, inflation and monetary policy.
Today the situation is a bit different with less visibilty regarding the situation in Ukraine and even if we can exclude potential risk of global war, we can't ignored the risk about bilateral sanction between NATO countries and Russia. It means significant problem with energy/metals/commodities supply and price, political destabilisation, cyber attack, etc... This kind of modification take time to be absorbe and modified in order to set up a new strategy were russia will stay isolated from global economy for a while.
The first economy to be impacted will be definitely the Europe in this crisis and the EURO since one week is in a free fall mode.
So what to understand from EURUSD chart and what to focus on? :
- Only a Weekly Chart Basis
1/ The previous upside trend ABC 0,82 to 1,60 has been follow by a consolidation in ABC towards 1,02 (or a construction of the long-term downside swing within a huge triangle)
2/ For now the ABC downside pattern within the bearish channel seems to be finished with the test of the 1,02 support - Then we are evolving within a range/triangle dynamic (Blue Frame)
---> That the graphical situation illustrating the context above.
3/ If the ABC downside pattern is not finished we gonna see a downside breakout from the triangle/range structure on going (inside the blue frame) to open further downside risk
----> Risk = Irregular running Range (Test of the 1,0075/0,9750)
----> Risk = poursuit of the bearish channel within a complex ABC X ABC pattern towards 0,8450
4/ RSI indicators is approaching support but didn't reached the previous oversold area where bullish reaction started = It is more likely to see more bearish momentum to be developed.
5/ Moving averages are now capping the market at 1,1530
Analysis
Regarding the key elements and giving more weight to the Waves structures and the recurrence of Fibonacci levels, we can still giving more credit to see a development of a further trading range (blue frame) than a free fall of the Euro within the bearish channel towards 0,8450.
Where it is more tricky to to have conviction is between a range in irregular with the test of parity before swinging up or triangle pattern with 1,0750 as key support before developing a new upside swing
The key resistance is for now clearly set at 1,1530 and only a break out of this resitance can lower the downside risk significantly.
Trading
=> Intraday/multi days traders will use 1,0750 as stop loss level to catch the dip and play agressive recovery with for now the Moving Average as Target to watch
=> Mid-term Institutional trader seems already in restructuration of the strategy by activating action to hedge the commodities upside risk and the pressure on Europe, so i would say that the hedge in place is between 1,0750/0,97 for the downside risk and 1,1530 (Neutrality area protection to adjust option)
Context:
Since 2000 EUR/USD is evolving between 0,82 and 1,60 providing two clear floor and cap level following the trend of global macro economy and the strategies deployed in the differents major central banks.
The last past weeks following the decision to lower the Quantative Easing, the different actions took in the world in order to control the inflation and the good figure confirming the pursuit of the accumulation of the growth (even slower than last year) in the develop countries - The consensus for the Euro were quiet clear => main research highlighted 1,08/1,12 as strong support area and 1,18/1,23 as strong resistance for a further trading range without significant element for EUR or USD to take significant advantage regarding Growth, inflation and monetary policy.
Today the situation is a bit different with less visibilty regarding the situation in Ukraine and even if we can exclude potential risk of global war, we can't ignored the risk about bilateral sanction between NATO countries and Russia. It means significant problem with energy/metals/commodities supply and price, political destabilisation, cyber attack, etc... This kind of modification take time to be absorbe and modified in order to set up a new strategy were russia will stay isolated from global economy for a while.
The first economy to be impacted will be definitely the Europe in this crisis and the EURO since one week is in a free fall mode.
So what to understand from EURUSD chart and what to focus on? :
- Only a Weekly Chart Basis
1/ The previous upside trend ABC 0,82 to 1,60 has been follow by a consolidation in ABC towards 1,02 (or a construction of the long-term downside swing within a huge triangle)
2/ For now the ABC downside pattern within the bearish channel seems to be finished with the test of the 1,02 support - Then we are evolving within a range/triangle dynamic (Blue Frame)
---> That the graphical situation illustrating the context above.
3/ If the ABC downside pattern is not finished we gonna see a downside breakout from the triangle/range structure on going (inside the blue frame) to open further downside risk
----> Risk = Irregular running Range (Test of the 1,0075/0,9750)
----> Risk = poursuit of the bearish channel within a complex ABC X ABC pattern towards 0,8450
4/ RSI indicators is approaching support but didn't reached the previous oversold area where bullish reaction started = It is more likely to see more bearish momentum to be developed.
5/ Moving averages are now capping the market at 1,1530
Analysis
Regarding the key elements and giving more weight to the Waves structures and the recurrence of Fibonacci levels, we can still giving more credit to see a development of a further trading range (blue frame) than a free fall of the Euro within the bearish channel towards 0,8450.
Where it is more tricky to to have conviction is between a range in irregular with the test of parity before swinging up or triangle pattern with 1,0750 as key support before developing a new upside swing
The key resistance is for now clearly set at 1,1530 and only a break out of this resitance can lower the downside risk significantly.
Trading
=> Intraday/multi days traders will use 1,0750 as stop loss level to catch the dip and play agressive recovery with for now the Moving Average as Target to watch
=> Mid-term Institutional trader seems already in restructuration of the strategy by activating action to hedge the commodities upside risk and the pressure on Europe, so i would say that the hedge in place is between 1,0750/0,97 for the downside risk and 1,1530 (Neutrality area protection to adjust option)
Trade active
Bearish pressure on going towards the long-term downside target as long as BCE will not align the inflation threat on US or other central bank
CIO & Head of market research (Automata - Akt.io)
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