On Wednesday the 24th of October, the single currency lost significant ground against the greenback to reach the 1.1379 mark. The drop gained momentum in Europe after breaking through the 1.1440 support. I reckon the bears ditched their protective stop levels after this breakout on the back of uncertainty surrounding Italy, after which market participants adjusted their positions ahead of the ECB meeting. They’ll now be waiting to hear an answer as to whether or not the regulator will move their planned date for ending their bond-buying program, and when they plan to raise interest rates. Will Mario Draghi change his tone or not?
Day’s news (GMT+3):
Fig 1. EURUSD hourly chart.
The upwards correction has come to nothing. In the European session, the pair jumped to 1.1477 before a sharp downwards reversal. Stop levels were activated below 1.1440. The drop came to an end at around the 90th degree. The weekly trend line runs through this level. If the weekly candlestick closes below 1.1400, sellers will aim for 1.1200.
I don’t make predictions for this pair on days where Mario Draghi has a press conference, just like on payrolls day. If we look at past behaviour of price movements ahead of ECB meetings, they tend to move against previous movements and trade within a narrow corridor for the 2-3 hours leading up to the press conference. It’s anyone’s guess where Draghi will send prices afterwards.
There’s a resistance at 1.1432. I think there are some stop levels here on short positions. There’s another set of stops at 1.1450. If the day closes above these, we can safely say that the pair has rebounded from the weekly trend line.