The EUR/USD pair initially went sideways on Friday, but then turned to rally towards the 1.17 level. That’s an area that should be massively resistive, as it was massively supportive in the past. It was the neckline of a head and shoulders pattern on the daily chart, and it’s likely that the move to the downside should continue. The measured move for the head and shoulders has this market looking for the 1.13 level underneath. That’s an area that is very important to me, because it is previous resistance, and it is also the 50% Fibonacci retracement level from the larger move. I think this move technically makes a lot of sense, especially considering that Mario Draghi was so dovish recently.
The Federal Reserve on the other hand is likely to raise interest rates several times, and this should continue to have money flowing towards the United States. I believe that rallies of this point are selling opportunities and that the 1.17 level should be a bit of a “ceiling” in the market. In general, I think that we will continue to struggle to rally, but if we break above the 1.1725 handle, that would be a turnaround of events and could have the market looking towards the 1.21 level. However, I think that Mario Draghi spooked the market a bit, and that is exactly what was needed to turn things around. I think the 1.13 level underneath would be massively supportive and difficult to break down below. If we were, the market probably goes down to the 1.10 level underneath, which of course is a structural support level based upon the large, round, psychological significance of the figure. One thing that think you can count on is going to be volatility.
Written by FX Empire