Weekly analysis for EUR/USD: QE and Greece shock EUR

EUR/USD Technical analysis Jan 26th – 30th

Last week the Forex market showed its true face that when the fundamentals align with the technical breakout levels results could be phenomenal.

EURO has been under pressure, technically and fundamentally. Common European currency was first pushed down the cliff by the SNB the previous week by scrapping the 1.20 floor. The European Central Bank, meanwhile, took the liberty given by the European Court of Justice to proceed with its Asset Buying Program and announced a massive 60 billion Euro per month Quantitative Easing program with the aim to rescue the sinking Euro ship.

After the catastrophic Swiss Franc announcement of the previous week EURUSD started the week off at 1.1555 level and traded within 100 pips range for the first half of the week before ECB president Mario Draghi took on the stage announcing his groundbreaking 1.2 trillion euro QE program. With Thursday’s QE tsunami EURUSD obeyed the supply and demand rules and slammed all the way down towards 1.1315 level on Thursday and ultimately to 1.1114 level on Friday. Last time the pair traded at this level was back in September 2003.

With its recent movement the pair demonstrated that market obeys important support and resistance levels. Once these levels are broken momentum picks up and continues until the next level.

At the moment, the pair has broken below 1.20 and 1.15 main monthly support levels and moving on a clear bearish trend. Especially being hit by massive 1.2 trillion Euro QE program and Grexit fears due to the victory of the left wing Syriza party, it seems like there will not be much of change in the market and traders should still be ready for strong volatility.

On every time frame, the price structure remains lower peaks and lower troughs with strong bearish momentum. Only on monthly time frame it appears that 1.08-1.11 zones had been relatively strong support and resistance levels. At this moment, as there has not been any official office take over for Syriza party and the market is still swallowing the QE program terms and condition there is not much to talk about any reversal options.

The current price remains below all three; 20, 50 and 100 day SMAs with strong bearish momentum and a clear bearish price action development concluding the bearish as intact with targets towards 1.11 and 1.08 monthly support levels.

Alternatively, a failure to break below the 1.11 support level would create a consolidating scenario with targets towards 1.1550 resistance level, which likely would play as a new sell trigger point as this level historically had been an important support and resistance level.

Additionally, the pair could make unexpected movements as the ECB broke the supply and demand equilibrium of the market with its new QE program. With the current bearish momentum strength traders should not be surprised if the pair moves towards 1.08 and 1.00 levels.

Resistance levels: 1.1365 (R1), 1.1550 (R2) and 1.1760 (R3)

Support levels: 1.1105 (S1), 1.1100 (S2) and 1.0800 (S3)