EUR/USD, during and after Mr.Draghi!
Imagine this, the euro went up after Mr.Draghi and this is the second time in a row after his speech. Well, I was pointed at this support 1.1060/80 in my morning EUR/USD analysis and that was the point of bounce after Draghi was answer at the question about growth. Even the Draghi was more dovish then hawkish in his answer, the pair reached the buyers teritory and they reacted strongly, pushing the pair constantly through resistances up. The pair reached the minor resistance at 1.1260/70 and stop there for a while, what I was mentioned in my analysis as well in this morning, the resistance from May 12./13. Next resistance waits for the bulls at 1.0300/20 and that could be the next target for the euro bulls. Interesting day at EUR/USD, this is great!
This is the preview of the EUR/USD moves during the ECB’s Monetary policy statement and Press Conference. What important is, the pair didn’t react strongly on the questions about Greek deal and possible Greek default. Draghi said that they are working on the firm and concrete agreement with Greece. Draghi also was talking about growth projections, about inflation, bonds and ECB’s role in the bonds market. It was interesting for sure. At this chart, you can see how technical analysis works even during the important events like this one!
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I agree that EUR/USD has two components. I really do see that a bottom has now been formed and we are not going to be seeing parity as is being called by so many. There is continual talk about FED tightening in the form of putting up interest rates. The IMF has called for the tightening to be delayed till early 2016. The initial promised date in June will soon be upon us and general market feeling is that it s not going to happen. There are a couple of banks making the call that the June meeting will see the first rate hike though I do not see it myself. The FED is stuffed to the gunnels with long dated US treasuries following Operation Twist. . Should interest rates rise then the value of these long dated treasure will fall. In the past the FED has turned a huge profit particularly under the stewardship of Dr Bernanke. I am not sure Ms Yellen will be wanted to be remembered for having returned a massive loss during her stewardship. This is possibly a very good reason for her to delay an decision to start raising interest rates. Inflation to use their language remains well anchored. I accept that unemployment has fallen to levels where a rise in interest rates would be permissible. However unless inflation starts pushing above 2%, then there is no urgent need to increase the interest rates. Thus I do not see it happening anytime soon. The Dollar strength seems to be largely attributable to the promise of a rise in interest rates. Thus if it is not going to happen anytime soon, I do see a period of prolonged Dollar weakness which will see EUR/USD move towards the top of the January range and a possible revisitation of the .50% fib of the big move from 1.39938 down to 1.04575. The 50% fib comes in at 1.22256 with the January high being 1.20992 which was made at the open. Having said that today’s candle is shaping up to be a grave stone doji even though there still remains over five and a half hours to close. If there is such a candle then it would be a bearish signal with the possibility of the price action heading down to the top of kumo. A good NFP result is being expected and if those expectation are beaten, the support at the top of kumo might just be tested. The other bearish aspect is that it was the lower Donchain Channel that was last touched. Thus in summary there are, in my opinion very mixed signals though on balance I am bullish the Euro and neutral to bearish the Dollar. A poor NFP outcome tomorrow will almost certainly send the EUR/USD hurtling toward to upper Donchain Channel. If it breaks then over the course of the following week there may be a test of the daily 200 SMA which currently comes in at 1.1804. It will be the first time that t has been touched since 2nd July 2014 and is well overdue a test. Interestingly the 200 SMA sits absolutely in line with the 382 fib retracement of the big move and comes in also at 1.18084. Thus let us see what tomorrow brings with NFP.
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I felt that Draghi was fairly bearish and particularly about keeping the QE program to the end and if conditions warrant, adding to it. He did take a bit of a lap of honour suggesting that it was working already – he could hardly say the entire project was a complete disaster. Certainly nothing that he said would in my opinion justify a 200 pip rally from the low. The only really possibly bullish thing he said is that QE would come to an end in September 2016 and he seemed very definite on this. According to the ECB projection inflation will be heading toward that ‘close to but below 2%’ target and there will be growth in the economy. This distinguishes him from the FED who kept us all guessing to the end as to when QE3 would actually finish. Eventually they finished it with a taper which extended the period of the guessing game.It is now looking iike the Euro has bottomed out and we are starting to see a series of higher lows. Looking at Ichimoku on the daily time scale, the number of bullish signals are limited. The only real bullish signal is that the price action is above kumo. Kumo is about to become very thin and vulnerable to the price action passing through it. However it does fatten up and that would tend to be support. Tenkan sen has an upward trajectory which is bullish. However it is below kijun sen which is bearish. Chinkou span is above the price action though has no clarence which gives a bit of a non-signal. Whilst the signal are anything but clear, I do favour the long side. I think that there is a good chance that the price action will make a slow grind to 1.14667 being the level of the upper 20 period Donchain channel before having a pullback to reload and push higher. I do see the EUR/USD by the end of the year back to where it started the year at 1.20992.
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Same here and there is not a only a question about the euro, what about the US dollar Chris? This is the BIG question from the start of the year 2015.
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