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EURUSD: today’s situation is 50/50


On Tuesday the 17th of October, the US dollar continued its growth against the majors. In the US session, the euro dropped to 1.1736. Market participants share the opinion that the dollar’s rise in the first half of the day was down to talk that John Taylor, an advocate of tight monetary policy, could become the next Chair of the US Federal Reserve. Donald Trump is expected to announce his choice for the post before the 3rd of November. With the support of some of the euro crosses, the daily candlestick on the euro/dollar instrument closed at 1.1766.

Day’s news (GMT+3):

  • 02:30 Australia: Westpac leading index (Sep);
  • 11:10 Eurozone: ECB president Mario Draghi’s speech;
  • 11:30 UK: claimant count change (Sep), ILO unemployment rate (Aug), average earnings including bonus (Aug) – the pound is very sensitive to these indicators;
  • 14:45 Eurozone: ECB’s Praet speech;
  • 15:00 USA: Fed’s William Dudley speech, FOMC member Kaplan’s speech;
  • 15:30 Canada: manufacturing shipments (Aug);
  • 15:30 USA: building permits (Sep), housing starts (Sep);
  • 17:15 Eurozone: ECB’s Cœuré speech;
  • 17:30 USA: EIA crude oil stocks change (13 Oct);
  • 21:00 USA: Fed’s beige book – this generally doesn’t affect markets.

Fig 1. EURUSD rate on the hourly. Source: TradingView

My predictions for Tuesday rang true. The euro dropped to the 112th degree before rebounding from it.

At the time of writing, the euro is trading at 1.1761. At the moment, we have the following picture. The rate corrected to 1.1781. From here, selling recommenced. The price missed the LB balance line by 5 pips. It also missed the balance line on the 16th of October.

The technical situation is unclear as different timeframes contradict each other. The H3 and H4 timeframes indicate a weakening euro, while the H6 and H8 timeframes are signaling that the upwards correction is set to continue. Cycles on the hourly timeframe suggest the euro will continue growing until the weekend. If this happens, the euro’s growth won’t fit into the head and shoulders model.

In my forecast, I’m expecting a new low to be reached at 1.1730 based on historical patterns on days of the week. Given that different timeframes contradict each other, on Wednesday, I’m not expecting a particularly sharp drop on the euro. In theory, in order for the rate to move towards 1.1670, it should first consolidate below the balance line (1.1780) by Thursday. There’s no way the price will exit the A-A channel.

I think that it’s too risky to trade on the euro/dollar pair today. Better to spend the day on the sidelines. I’d advise those with short positions to stick to their trading plan.

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