- EUR/USD about to break out below the daily H&S confirming a completion of top formation?
- Market deems that today's action from the ECB was indeed a dovish taper
- DXY topping out after Fed/ECB divergence?
- Looks like we need to wait for US GDP on Friday 27th.
With a low of 1.1655, EUR/USD bears are testing the bulls commitments at the crucial 100 DMA (1.1672) that penetrates slightly through a completion of the H&S bearish neckline area at 1.1650, (26th July low, 5th Oct low of 1.1669 and 1.1662 ( daily H&S Aug.17th low)).
However, the DXY, +0.94%, could be tiring after climbing a mountain today after the ECB's dovish taper announcements, reaching as high as 94.599. The benchmark US 10-year yields might also have topped out just recently at 2.4554%.
So what will it take?
Fundamentally, the bears need some dollar positive sentiment in order to push EUR/USD over the edge and, so far, it doesn't look like it will come today.
The US House tax panel chair, Brady, was reported earlier today saying that the narrow budget vote shows some Republicans won't support tax reform without a deal on State while US Senate Democratic leader, Schumer, was reported saying ‘many are uncomfortable’ with plans for State's local tax deductions. The US House Speaker Ryan, however, announced that with the House adopting the budget, at least, is one step closer to a ‘revamp’.
Looks like we might have to wait for tomorrow's GDP results ...
"Friday's GDP report should support the case for a December interest rate increase," explained analysts at ING Bank. "With growth looking firm, inflation likely to rise and Federal Reserve officials broadening out the reasons for why higher interest rates much be required (financial stability risks, asset valuations and loose financial conditions) we think next week's FOMC statement will underline the strong case for a December interest rate rise," the analysts at ING added.
The 1.1662 August low would be a completion of a top formation while a break of 1.1650 will set the wheels in motion for a reversal 26th of June 2017 rally from 1.12 the figure. "Failure at these August and current October lows would confirm a top formation and trigger a sell-off to the mid-June high at 1.1296 and the more important 1.1110 end of May low," argued analysts at Commerzbank.
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