Previous:
Last week, all the majors lost ground against the US dollar except for the pound. The biggest loser against the greenback was the Kiwi (-1.35%), followed by the Swiss franc (-1.17%), yen (-1.11%), euro (-0.93%), Aussie (-0.77%), and the Loonie (0.01%). The pound, on the other hand, posted a rise of 0.27%.
In Friday’s US session, the EURUSD pair dropped to 1.1353. The euro incurred losses across the board, with the EURGBP cross suffering the most. The euro also came under pressure from the US dollar after a strong report on US industrial production.
Day’s news (GMT+3):
- 10:00 Germany: PPI (Dec).
- 14:00 Germany: German Buba monthly report.
- Martin Luther King Jr. Day.
Fig 1. EURUSD hourly chart.
Current situation:
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I was right not to pay attention to the triple bullish divergence. From the upper line of the channel, the euro slumped to 1.1353. The single currency then recovered from the 157th degree by 22 degrees. This level is doing well at keeping the pair within the current trend. Given that the balance line runs through 1.1386, and the trend line through 1.1390, we could see the pair overreaching. It’s currently rising despite a lack of trading volume, so I’m expecting a drop to 1.1356. I’m counting on seeing the formation of a double base.
The pair may not end up declining. China has offered to help close the US’ trade deficit with them by increasing imports to the tune of 1 trillion USD. The optimism surrounding these trade negotiations between the US and China is good for risky assets, which is bolstering the euro. From a technical standpoint, the euro looks ready for a decline. Market participants are waiting for a trigger to start selling.
