EUR/USD bounces off lows 35-pips; FOMC could knockout cold the euro

Jose Ricaurte Jaen Analista independiente

Currently, EUR/USD is trading at 1.0537, marginally up +0.02% or 2-pips on the day, having posted a daily high at 1.0556 and low at 1.0492.

Today's EU economic docket had aligned valuable releases expected by market participants to have a better understanding of the progess, if any, the eurozone had achieved in the last 12-months as Paul Hannon at WSJ noted, "For the first time in almost four years, none of the eurozone’s 19 members was in deflation during January." Although, the Consumer Price Index (YoY) clocked 'as expected' at 1.8%, there is evidence that some policies had a positive impact in the bloc.

On the other hand, the Euro vs. American dollar exchange rate seems to dilute further political risks from France as 'Frexit' and Greece as another 'bailout' as the currency pair trades 330-pips from the 2017 high. Hence, the shared currency had an interesting recovery during the first 5-weeks of the year but still suffers from the ongoing disconnected communication among EU members.

Finally, traders and investors move their battle horses as a rate hike in March, although too soon, has not been ruled out. Today's FOMC minutes should provide clarity or more evidence to keep entertaining the idea.

Federal Fiscal Policy Chartbook: What’s the Baseline?

Historical data available for traders and investors indicates during the last 8-weeks that EUR/USD pair had the best trading day at +1.13% (Jan.5) or 119-pips, and the worst at -0.80% (Jan.18) or (84)-pips. Furthermore, the US 10yr treasury yields have traded from 2.45% to 2.38%, down -0.29% on the day at 2.42% or -0.0071, during today's session it quoted as low as -1.18%.

Technical levels to watch

In terms of technical levels, upside barriers are aligned at 1.0590 (50-DMA), then at 1.0735 (100-DMA) and above that at 1.0830 (high Feb.2). While supports are aligned at 1.0490 (low Feb.22), and below that at 1.0380 (low Jan.4). On the other hand, Stochastic Oscillator (5,3,3) seems to debate between continuation towards 'oversold' or shift direction to head north. Therefore, there is evidence of a neutral stand during today's trading session.

On the long-term view, upside barriers are aligned at 1.0566 (short-term 23.6% Fib), then at 1.0706 (short-term 38.2% Fib) and above that at 1.0820 (short-term 50% Fib). To the downside, bears need an open and close below 1.0560 to increase the selling pressure to drag the pair even lower, that would open all doors to attempt a breakdown attack near 1.0338 (low Jan.3).

A break below this level, would signal a tangible opportunity and attract massive short-sellers towards parity. However, 1.0070 figures as the euro's last stand, those couple pips away from the round mark level make the difference between an all-time low-bottom vs. the 'infamous' parity.

EUR/USD: downward pressure increases ahead of FOMC

Author

Jose Ricaurte Jaen

Analista independiente

Born in Colón (Panamá). Over the last years, he has been designing currency algorithms for the retail industry.

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