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Euro/Dollar: Sellers Strengthening Below Trend Line

Hourly

Yesterday’s Trading:

Monday against Friday didn’t come off. After the meetings and announcements of various central banks, it became clear that no one wants to harm their economy by tightening their fiscal belt.

The euro has been under pressure for a few trading sessions now. Last night saw more pressure was heaped on by the US Fed’s Bullard who announced that there is a chance of an interest rate rise for the US in October.

On Monday’s thin market the euro/dollar dropped to 1.1180. The D3 line was broken. The fall slowed at the U4 between the 112th and 135th degrees.

Main news of the day:

  • At 10:00 EET, the Eurogroup’s Jeroen Dijsselbloem will give a speech;
  • At 11:30 EET, the UK is publishing its public sector net borrowing numbers for August;
  • At 13:00 EET, the CBI’s UK industrial trends survey is out;
  • At 17:00 EET, the Eurozone’s September consumer confidence index will be out.

Market Expectations:

Goldman Sachs is expecting the ECB to announce an extension of their QE program into 2017 and a weakening of the euro against the dollar by 6-10 figures from the current level. Firstly though, 1.1086 needs to be passed (30th August maximum) and then 1.0960 (trend line, see Daily tab).

Technical Analysis:

  • Intraday target maximum: 1.1210 (in Asia), minimum: 1.1135 (in the States), close: 1.1160;
  • Intraday volatility for last 10 weeks: 125 points (4 figures).

The euro/dollar is trading around 1.1201 at the D3. The euro has fallen from a 1.1459 maximum as part of a troika. There’s no divergence between the AO indicator and the price. This means there’s going to be a further minimum. Due to this, in my forecast I’ve gone for a euro rebound to the trend line and a fall to 1.1135. The 157th degree is a support, so I’m thinking the day will close above 1.1142.

Daily

The euro/dollar has fallen below the 1.1213-1.1250 support and broken the trend line which passes the 1.0847 and 1.1086 minimums. A bear take over started to form on the candle without a recoil. Yesterday I believed that if the trend line were to break, we’d be heading to 1.1086. The interim support is the daily LB. Under the current bar it goes through 1.1115. If we take a level taking a correction into account, it’s better to take 1.1150. Now to the Weekly.

Weekly

On the weekly we can see a sideways after a pinbar. The resistance zone is between 1.1436 and 1.1466, with the support at 1.1086.

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