On Wednesday the 13th of March, the euro rose to 1.1326 against the dollar. I had been anticipating a recovery to 1.1314, but news about Brexit pushed the rate up further to reach 1.1338. Market activity is usually low ahead of closing time, but not yesterday.
The greenback collapsed on the back of votes in British parliament on the terms of exit from the EU. The House of Commons voted against a no-deal Brexit. Today, the house will vote on delaying the date of exit to either May or June.
Day’s news (GMT+3):
The single currency has technically recovered to the 112th degree, where the bulls and the bears clashed. This is apparent from the increased volume at the beginning of the US session. The bears tried to break through 1.1310 (45th degree) for 4 hours. When the results of the votes on Brexit were revealed, the euro jumped to 1.1338. The bulls were unable to break through the 112 – 135 degree range, so the situation currently favours the bears on the hourly timeframe.
Volatility on the pound has skyrocketed on the back of Brexit developments, which is affecting other currencies in turn. I’ve declined to make a forecast today as there will be another vote in parliament.
I’ve marked the intraday swings on the chart between 1.1277 and 1.1388. This type of structure is often seen on cryptocurrencies. After this, if the rate drops below the 50% level, the gains made here will be erased completely. For the euro, the 50% level is at 1.1307, which is below the trend line. As such, if this line is broken, assuming that long positions will be closed, we can set our sights on 1.1277, with 1.1285 (45 degrees) acting as an intermediate support.
I want to stress that this type of formation is very often seen on cryptocurrencies, so there’s no guarantee that this will work for the euro. The pound is being shorted on the crosses. At the time of writing, trading on the euro crosses is mixed.
What else should we look out for? Low volumes in the event of a decline and rebounds from the 22nd degree. The bulls are trying to keep the trend alive by keeping the rate above the 22nd degree. If it doesn’t hold up, when the rate starts to rise again, we can look at least as far as the 45th degree.