On Wednesday the 6th of June, trading on the euro closed up. Traders were active at the beginning of the European session. There was a surge in volatility during ECB chief economist Peter Praet’s speech. He confirmed that the ECB’s executive board will discuss when to end the bank’s bond-buying program. The exchange rate went up to 1.1796 on the back of this. The session’s bullish trend was helped along by the euro crosses.
ECB board member Weidmann also gave the euro bulls a boost. He noted that inflation in the Eurozone is slowly returning to the ECB’s target level and that market expectations that the QE program will end before 2018 is over are plausible.
Day’s news (GMT+3):
Fig 1. EURUSD hourly chart. Source: TradingView
On Wednesday, the comments of two ECB board members helped the bulls recover to 1.18. In Asia, the pair is trading in the reversal zone between the 112th and 135th degrees. The dollar’s decline across the board along with growth on the euro crosses is pushing the EURUSD pair upwards. The pair is currently trading at 1.1803.
A bearish divergence has appeared between the price and AO indicator. This is a sell signal, but we’ve seen that this doesn’t work in practice when session trends are brought about by geopolitics and speeches from central bank officials.
On the hourly timeframe, everything is pointing towards a downwards correction. I reckon that the rate is going to drop below 1.1790 again, after which the drop will intensify. The trend line runs through this level. We’re currently in a sell zone (112 – 135), so I think the rate will drop to around 1.1710/20. Sellers have 2 resistance levels to overcome on the way; 1.1775 and 1.1752 (LB balance line and 45th degree).
There are some important events scheduled for today, which could impact the EURUSD pair via the euro crosses.