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Euro/Dollar: After Rebound, Expect Fall to 1.1030

Hourly

Yesterday’s Trading:

On Thursday the euro/dollar fell by 230 points. In the second half of the day, Mario Draghi made the euro drop to 1.11.

The ECB kept its interest rate unchanged. Mario Draghi announced that the ECB is ready to extend QE in December and a drop in the base rate and deposit rate was discussed.

Main news of the day:

  • From 10:00 to 11:00 EET, EU PMIs for the service sector in October will be out;
  • At 15:30 EET, Canada’s September CPI will be out;
  • At 16:45 EET, the US is releasing its October business activeness index in the manufacturing sector.

Market Expectations:

The euro fell below 1.1086. Now it needs to close the day below 1.1070 and then the sellers will see the road to 1.0970 open up, with a EURUSD nosedive to 1.0461 following it. There’s no important news out in Europe today (I don’t see the PMI as important) which could change the fate of the euro/dollar, so after a rebound, I’m waiting for a continuation of yesterday’s tendency to 1.1035.

Technical Analysis:

  • Intraday target maximum: 1.1125, minimum: 1.1035, close: 1.1055;
  • Intraday volatility for last 10 weeks: 121 points (4 figures).

The euro/dollar has fallen below the D4 and has stopped still near 270 degrees. There’s no AO divergence with the price, meaning we should consider a correction after a fall in the rate to 1.1035. We could see it head straight to 1.0965, so don’t be caught out on the downward knife edge.

Daily

On 15th October, Ewald Nowotny flipped the euro rate on its head, on 22nd October, Mario Draghi set the fall in stone. Yesterday saw the trend line and the LB broken. The eurobulls tested the 3rd September minimum (1.1086). The euro is now above the support. The dotted line is the trend for the closing prices. A close below 1.1050 will be enough to open the road to 1.0965. We can see a bearish impulse on the monthly time frame which could be compounded towards the end of the month. Now to the weekly.

Weekly

The euro/dollar tested the lower limit of the 1.1086-1.1494 channel after Draghi’s press conference. I’m waiting for a close below 1.1086 and then we can prepare for a break in the trend line which takes its beginnings from a 1.0461 minimum.

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