We have a significant technical event yesterday. As you can see in my daily chart below, the trendline support has been violated to the downside, bottomed at 1.4625. This fact should trigger further weakness for the Euro with 1.4450 as technical target, but we need to be very careful here since the pair closed much higher at 1.4716 indicating limited bearish. Every time a trendline support is broken, oftenly price retreat to the upside and testing the trendline area, which is now become a resistance. So, as long as the pair stay below the trendline, expect further bearish scenario.
From h4 chart point of view, as you can see below, indecisive market indicated by range area of 1.4850 – 1.4680 since last week was broken to the downside, but price retreat to the upside and now back inside the range area. This should be seen as a false breakdown for now which is usually trigger significant upside pullback, so please be very patient at this situation. Technically, we need a consistent move below 1.4680 to confirm bearish scenario towards 1.4450 area.
Like I said yesterday, we will have some key fundamental numbers this week. Although it looks like technical movement already a step ahead of fundamental events, we know that these news will be the market mover. Today the FOMC is going to announce the interest rate. While it’s more likely that they will leave funds rate unchanged at <0.25%, investor’s focus will be at the statement about economic condition. If they give an optimistic view about economic recovery progress, the Dollar should be weaken as risk appetite increase. On the other hand, if they give a pessimistic view, Dollar should gain as risk aversion increase.
dear setyo, i always follow ur analysis bcos i see reason wit u due to ur clear and simple approach to technical analyses. But all i want to know from u is wot effect d FOMC statement will have,i.e. i read and understand wot u said above, but even though i dont trade d news, i want to know exactly wot -for example- u think will happen to EURUSD if d statement was optimistic(in favor of d dollar) and vice versa? U said d dollar will weaken if d statement is good for d dollar to favour risk appetite and risk aversion if d case is d opposite? Just translate wot u mean above wit respect to buying or selling d dollar? i hope u understood my question?
Hi Bruno,
I am not sure I fully understand your question, but let me try
I believe what drive the market today is investors concern about global economy progress. What happen in the US, impact all markets. So if we have optimistic statement from FOMC, the stocks, gold and oil are likely to continue the bullish rally and Dollar as a safe heaven currency will not look so interesting to investors. This is called risk appetite, where investors tend to hold/buy riskier assets rather than Dollar. On the other hand, a pessimistic view tend to make investors hold/buy Dollar as safe currency as stocks, gold and oil will look to risky to hold/buy. This is called risk aversion. Very simple
Dear Setyo,
According to the market movement on EU/USD pair today, is there any possibility that the USD will recovered and finally resulted bearish on EU/USD?
@Iceman: There are always possibilities in forex market as nothing is 100% accurate, but I think the Dollar should keep under pressure both technically and fundamentally, unless we have significant negative tone from ECB today.