By Adinah Brown
From a technical standpoint, it may be of relief to traders with EUR/USD short positions, that the pair may be out of momentum to push higher. If the currency trades around the current rate until the end of the week, we may see the chart throw up a convincing bearish doji candle stick pattern (bearish engulfing on the daily). Checking to see if the pair is now overbought, the RSI indicator signals that it is, in both the daily and weekly chart. The current bullish run seems to be a continuation of push that started back in December 2016 – quite a long duration run for a highly traded currency.
Earlier this week, the currency pushed above a previously credible resistance level around 1.22. This may be now used as a support line to push even higher, however, yesterday, the price reached another obstacle which is a support line going back to 2005. This level may act as a point of resistance by which assertive sellers can enter the market. I think this level, or somewhere near it, will provide the grounds for the price to stabilise or retrace.
Should the price ignore this immediate resistance above, the price hits another serious resistance level, which is a downward sloping resistance line going back to 2008. This surely must be the last stop for the EUR/USD and any move above it will not be due to trade, but due to a shock in the market. I believe that as there is a monumental convergence of support and resistance lines, 2018 will be a big year for the EUR/USD. At a price below 1.25, the EUR/USD will likely stabilise however, at some point during the year, the pair will make a cyclical move in either direction – likely around July.
Just like when the Fed started raising rates, should the ECB announce the end to QE, this does not mean the price will continue higher, rather, this information will have already been built into the price and it may then begin its long-awaited retracement following an initial spike.
About the Author:
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Adinah Brown is a professional writer who has worked in a wide range of industry settings, including corporate industry, government and non-government organizations. Within many of these positions, Adinah has provided skilled marketing and advertising services and is currently the Content Manager at Leverate.
