EURUSD: pair trading around the consolidation support

Previous:

On Thursday the 29th of November, trading on the EURUSD pair closed slightly up. The pair traded within a narrow range of 1.1350 – 1.1400. Market participants were responding to news from the UK, Italy, and US. Activity was low as markets awaited the publication of the minutes of the FOMC’s November meeting, which was expected to provide hints as to the central bank’s intentions with regard to tightening monetary policy.

According to the FOMC minutes, committee members discussed the timeframe for suspending interest rate hikes. The dollar lost ground against the euro, but not much. US10Y bond yields dropped to around 3.00%.

According to CME Group’s FedWatch, the likelihood of a rate hike in December is 82.7%. CME also expects just one interest rate hike for the whole of next year. So, remarks from FOMC members as well as macroeconomic data from the US are of critical importance to global currency markets.

Day’s news (GMT+3):

  • 10:00 Germany: retail sales (Oct);
  • 10:45 France: CPI (Nov);
  • 11:00 Switzerland: KOF leading indicator (Nov);
  • 13:00 Eurozone: CPI (Nov), unemployment rate (Oct);
  • 16:30 Canada: GDP (Q3), industrial product price (Oct);
  • 18:45 US: Chicago PMI (Nov);
  • 21:00 US: Baker Hughes US oil rig count.

Fig 1. EURUSD hourly chart.

Current situation:

I was right not to make any predictions about the euro yesterday. The thought didn’t even enter my head. The news kept the pair trading within a narrow range, from which it should break out today.

I’m expecting a breakout of 1.1387 at the beginning of the European session and a subsequent drop to 1.1368. If the drop is sharp enough, we can target 1.1349. The jury is still out on whether it can go any lower. We need to see what kind of volume the bears will encounter, and how they will behave around the 45th degree.

If we don’t get a drop in the next 2-3 hours, and the bulls start pushing towards the 1.1400 resistance, we can expect further growth to 1.1425. If the bulls break through this level, we can expect trading to close around 1.1465 at the U3 MA line.

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