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EURUSD lower on Dovish ECB, USDJPY reacting to strong US GDP numer

The ECB left rates unchanged yesterday as expected and the dovish tone in the press conference has sent the EURUSD pair lower, falling through 1.1700. The Daily chart is showing price compression around 1.1700 with a loss of 1.1600 suggesting a move lower to 1.1500. The blue lines on the chart support the view that lower levels are coming as they form a bearish pennant continuation pattern. Finally there appears to be an early Head and Shoulders pattern on the Daily chart. The right shoulder is currently being formed and is so far under developed. The pattern is highly visible but confirmation is need with a loss of 1.1480 and a loss of the green trend line.  Deep support can be found at 1.1314. Later today US GDP is expected to be released with an expected reading of 4.2% from a revised 2.0% previously. There have been predictions of a strong number from senior White House figures including the President, once again breaking with tradition of silence ahead of economic releases. Bears will be looking for a break higher above the upper blue trend line at 1.1740 and a short squeeze to 1.1850. A break above this level would support the view that a double bottom has formed at 1.1510 and target a run up to 1.2100. This would consequently give the potential head and shoulders pattern more time to form the right shoulder.

The USDJPY pair has declined since hitting the 113.000 level last week and has retested the rising blue support trend line at 110.620. A loss of this line paints a bearish picture with a move under 110.000 confirming a lower high and setting up a test of the higher low at 109.400. Further losses can move to the significant support around 108.400 to 108.000. This area contains a low volume pocket and has seen buyers step in recently. If price is pushed under this zone bears may be able to test 107.300 with a view to reach 106.000 followed by 105.000 and the low at 104.700 where buyers are expected to be lurking down to 103.000. We are seeing buyers defending the 111.000 area and the blue trend line with a very simple view what a move back above 111.400 gives them some breathing space. There has been sharp moves up and down through the 112.000 area which has created an uneven distribution on the chart. Should price regain 112.200 and drive higher it would support a move to the recent high at 113.200 followed by a retest to 114.730. The US GDP data later today will be eagerly anticipated to provide a view to US economic strength. A positive number can see risk on sentiment push prices in the pair higher.

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