Chart Of The Week: EUR/USD ripe for a u-turn, depending on ECB

This week has the opportunity to prove to traders that markets have the ability to defy all odds. EUR/USD has rallied in its single biggest weekly jump since 2016.

As explained in last week's analysis, where the market proved its ability to mock even the most plausible analysis, despite the presumption that the euro's rally was due a correction, it had the ability to continue to test the weekly trendline. Well, not only did it continue to test and break the weekly resistance in the late 1.11 handle, EUR/USD went on to score a high of 1.1356, an additional 1.5% tot he 2018 point of control. The question now is how far can this rally continue without seeking liquidity back to the downside, as liquidity is starting to look sparse at this juncture. 

Looking to EUR/USD's volume profile since June 2019, there was a lack of liquidity between 1.1400 and 1.1300 with the ATR higher within 1.4-1.12. Sharp daily declines and wider ranges into 1.1220 make for a likely level of equilibrium for EUR/USD today for which buyers could be seen stepping in on a pullback for a 23.6% Fibonacci retracement. Below there, the point of control of he Feb rally and carry trade unwind, is located at 1.1127, correlating with a 38.2% Fibo target. 

On the other hand, should the European Central Bank disappoint, ( instead of cutting interest rates, seen looking at targeted measures to support corporate and SME lending, e.g. a TLTRO targeting the corporate sector), the rally market could easily be seen headed to 1.1450 (as per volume profile of the 2018 downtrend) on expectations that the Federal Reserve will cut rates by a further 50 basis points on March 18th. 

EUR/USD awaits ECB through weekly trendline