EURUSD bounces off the 61.8% Fibonacci Retracement

As we said last week, the pair touched 1.1040 zone and moved towards 1.08 zone, despite a brief hope in the market that the bear run was finally over. As usual Greek news came as a chaos putting pressure on Euro, despite ECB president Mario Draghi’s optimistic speech last week.

On Thursday, EURUSD broke above its 1.10 psychological resistance level (1.1040 level was right on 61.8% Fibonacci retracement level) after its steep decline, however could not sustain itself above 1.10 level. As the US jobless claims were announced as usual better than expected, the pair once again took a southward path and on Friday hit the low of 1.0802 touching 200 hours Simple Moving Averages.

Although, a number of US economic announcements are missing analysts’ expectations, the US labor data is often better than the previous expectations. Market also focuses on US labor data as it is FED’s one of the two key indicators besides inflation rate.

So what is really happening?

The Fed Chairwoman Janet Yellen is taking a cautious stance while talking about the interest rate increase. While everyone is expecting to see some kind of hawkish move from the Fed, the Fed keep disappointing the public with their dowish announcements. With this phase we could expect a rate hike from the Fed towards the end of the year unless the inflation pressure eases off the US economy.

At this moment from technical point of view there are also a number of key points which require attention for EURUSD traders:

1- The pair has bounced off the 1.1040 level, which falls on 1.10 psychological resistance as well as 61.8% Fibonacci retracement zone for 25 February – 13 March 2015

2- The pair could not break below 1.0800 zone, which falls right on 200 hour SMA and the middle line of the falling Regression Channel

3- There is an unconfirmed reversal candlestick pattern on weekly timeframe, which will be confirmed if the pair breaks below 1.0760 zone

On weekly timeframe, technically there is no difference as all of our indicators still show strong bearish momentum.

Moving on to daily time frame, we can see the strength of the bearish market sentiment fading out; however there is no bulls on the horizon neither. We can also see that as the market bounced off the 61.8% Fibo retracement, daily candlesticks went below 5 day simple moving average (in purple) has changed its position from dynamic support to dynamic resistance for the last trading day of the week. Meanwhile, RSI could not break above 50 neutral level and turned towards 30 zone. However, looking at MACD we can see that the signal line has gone below the MACD bars which is a bullish indication. On the other hand our main trend indicators, 50 and 200 day SMAs are still sloping downwards, which indicates the continuation of the bearish trend.

At this moment, the market is moving sideways with unclear trend direction with stronger bearish bias than bullish. Nonetheless, from current market outlook point of view each bullish attempt could be seen as the next bear run which is also supported by the fundamentals. However this view would be subject to change if the following criteria are met:

1- 1.10 psychological resistance zone is broken

2- European fundamentals show further development especially the news from Greece

3- There is further inflation rate disappointment from the US

Moving onto 4 hour timeframe, indecisiveness of the market becomes even clearer. The pair is trading between 50 and 200 period SMA, which indicates sideway market development. RSI is right on 50 level and MACD bars are just above the 0 line. Thus, looking at the price action, we can also conclude that current retracement attempts are consolidatory moves.

The pair at the time of analysis is trading below 5 day SMA but below our 50 and 200 day SMAs as well as below 1.10 psychological resistance level and 61.8% Fibonacci retracement zone. Our views have not shifted from last week, if the pair breaks above 1.1040 resistance, we could possibly see the pair move up towards 1.1240 (50 day SMA) and 1.1380 level (100% Fibo). Such bullish move though is not expected to be long-lasting and should be seen as an opportunity to short the pair once again.

Alternatively, the move below 1.0760 could trigger further sell orders and push the pair towards 1.0350 and 1.00 support levels.

Weekly Pivot Point: 1.0880

Weekly resistance levels: 1.0935 (R1), 1.1040 (R2), 1.1160 (R3)

Weekly support levels: 1.0620 (S1), 1.0460 (S2) and 1.0350 (S3)