EURUSD has come off the boil of logging a two-week high at 1.2510. Option related selling has been in the mix, helping drive the pairing below 1.2480. The dollar has also staged something of a broader rebound, which has seen USDJPY climb above 108.50 and tip lower from two-week highs. Recent dollar declines, notably in the cases against the yen and Australian dollar, have come despite markedly favourable shifts in the U.S. buck’s yield advantage, but this also is generating market narratives about buying dollars for the longer term. Much will depend on global asset market performance. If risk-on conditions persist in the face of heightening Fed tightening expectations, then the dollar will likely remain on a downward path as investors seek out higher beta, higher yielding assets. But if we see fresh bout of risk-off, the dollar is likely to rally.
The EURUSD, today is at nearly full retracement from the drift seen the first week of February, therefore despite the strong Euro and the weakness seen on US Dollar, in short term is likely to see the pair making a correction from the sharp rally seen since yesterday. The key level however in order to claim that the downwards correction scenario is indeed possible is a break of the intra-day support at 1.2440-1.2450 area, which is the area of the last 2 low fractals seen in the hourly chart. A break below this area, will triggered a short position with targets at the low Bollinger Bands pattern and the 61.8% Fibonacci Retracement level, at 1.2420-1.2400 area. Intra-day Momentum indicators are mixed, with Stochastic slopping lower, indicating negative momentum, while AMCD remains positive since February 9th.
Oppositevely, with the bigger picture remaining bullish, a hold above this support area mention above, will give the confidence of another test higher up to the January 25th and February 1st highs at 1.2537 and 1.2523, which are the highest levels seen since December 2014, provide the upside targets. Daily momentum indicators indicate the continuation of the upwards movement.
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