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EUR/USD: Bear divergence on the 8H


On Thursday the euro closed slightly up against the USD. The dollar was under pressure in the first half of the day, but was able to win back a large part of its losses in the second. The USD managed to head into the plus zone against the GBP after news about a planned announcement from UK PM May set for next Tuesday. She is set to speak about Brexit and this news caused a pound sell off throughout the market yesterday. Due to this, the euro/dollar traded for a few hours at around 1.0660, from where it fell to 1.0611 by the end of the day after the growth of the euro/pound ended.

The number of initial unemployment benefit application in the US increased to 247k (forecasted: 255k, previous: 237k)

Market expectations:

Today is Friday: the last trading day of the week. Since the euro/dollar has fallen below the 1.0620-1.0628 support, my forecast is for a weakening of the euro to 1.0556.

Day’s news (GMT+3):

  • 12:30, BoE credit financing conditions and Bank’s Saunders to speak;
  • 16:30, US December retail sales excluding auto sales, producer price index, retail sales and base producer price index;
  • 17:30. US Fed’s Harker to speak;
  • 18:00, US preliminary consumer confidence and inflation expectations data from the University of Michigan for January;
  • 21:00, number of drilling rigs according to Baker Hughes.

Technical analysis:

Euro/ rate on the hourly. Source: TradingView dollar

Intraday forecast: minimum: 1.0556, maximum 1.0640, close: 1.0692.

Yesterday’s intraday formation coincided with my forecast without any amplitude fluctuations. The euro/pound cross corrected the market.

On Thursday the euro’s strengthening finished at the U3. From 1.0685, the euro fell to 1.0604. In accordance with my forecast, I’m waiting for a further weakening of the euro to the 112th degree at 1.0556.

I reckon that the euro will rise from its current level of 1.0615 to 1.0637. The growth could be sharp, showing the buyers about the price’s intentions to sift to 1.0685. Since the stochastic is nearing the sell zone, 1.0637 could be a bear trap for them.

Now to why I think like I do. Yesterday the euro rate dropped with a bear divergence candle pattern. Thanks to this fall, a pinbar formed on the daily which has a bullish body. For a strong sell signal, the euro needs a bearish body. Although, bear divergence has formed on the 8H. This is a sell signal for the euro. Now the bulls have a chance to use the bounce to close long positions at 1.0637. If I’m wrong, the rate will head for 1.0685 to form a double bottom because I don’t see any growth passing 1.0685.

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