EURUSD's spring blossom

Until the last week every single market player was extremely bearish on EURUSD, just until the FOMC meeting minutes and Janet Yellen’s press conference. With just a single press conference the US dollar depreciated as much as 400 pips against Euro. EUR/USD had its 9 day high, testing its 1.10 psychological resistance zone. With its latest move, the market once more time traders may trade by technicals, but they cannot ignore fundamentals.

So what is really happening?

As everyone expected the FED dropped its “patient” line in their minutes however this did not come without a surprise. Most of the people were expecting a hawkish view from the Fed that the US economy is doing good and the FED is going to be hiking the interest rates soon. However, what FED announced shook the USD till its roots. They lowered the interest rate trajectory. Not only that, the FED also downgraded their view on economic growth.

The US dollar depreciated against its counterparts, including the troubled Euro following the more-dovish-than-anticipated tone of the FED.

EURUSD

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 1.0460 zone, which was the bottom line of the falling regression channel and is being traded right around the middle line

2- 1.0460 also falls on 150% Fibonacci retracement zone for July 2008 and November 2008 which was the steepest fall for the pair

3- 1.0460 zone also happens to be the lower boundary of the falling trend line since July 2008

4- Weekly high was limited at 1.1040 zone, which also acts as a psychological resistance zone as well as 61.8% Fibonacci retracement zone for 5 February and 13 March 2015 and falling trend line also falls right on this level

On weekly timeframe, technically there is no difference as all the technicals still show strong bearish momentum.

Moving on to daily time frame, we can see the strength of the bearish market sentiment fading out. We can also see that 5 day simple moving average (in purple) has changed its position from dynamic resistance to dynamic support for the last three trading days. Meanwhile, RSI is back above 30 zone heading towards 50 neutral zone and MACD signal line has gone below the MACD bars which is also a bullish indication.

Looking at these relatively minor bullish indications, we cannot yet conclude that the trend has reversed. 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- The pair breaks above the middle line of the falling regression channel

2- 1.10 psychological resistance zone is broken

3- European fundamentals show further development

Moving onto 4 hour timeframe, every indicator and oscillator gives bullish signals except the 200 SMA. Thus, looking at the price action, we can also conclude that the trend has not reversed yet, and current retracement attempts are consolidatory moves.

The pair at the time of analysis is trading above 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. If 1.1040 zone is broken above the pair could possibly bounce 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 pair might bounce off the 1.1040 zone and continue its bearish rally 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)