EUR/USD Trading at Ascending Triangle Support

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EUR/USD Trading at Ascending Triangle Support

The EUR/USD has been choppy. Let’s first understand the backdrop before we get into the choppy consolidation action.

EUR/USD 4H Chart 4/8
eurusd 4h chart 4/7
(click to enlarge)

1) Euro is pressured due to the ECB’s QE measures. This should keep the euro bearish vs. the US dollar in the medium-term because the FOMC is looking to raise rates this year. The divergence of monetary policy path over the next year is the main reason why EUR/USD fell to 1.0462 in March.
2) In the second half of March and early April, we had 2 major fundamental factors from the US. The first was a non-hawkish FOMC meeting that did not show a bank gearing up for a rate hike mid-year. There are growing doubts regarding whether the US economy is as strong as the Fed saw at the beginning of the year. Last Friday, we got the US NFP jobs report, which showed a disappointing print for March. The fact that the FOMC is anchoring its plans to raise rates on a positive trajectory of labor market improvements means that the chances of a mid-year rate hike is even more remote. This has stopped the USD from gaining at least in this short-term.

Now, price action in EUR/USD suggests that these confounding fundamental factors are making traders unsure of direction. The 4H chart shows an ascending triangle with resistance in the 1.1040-1.1050 area. During the 4/7 session, price retreated from resistance down to about 1.08. It is pausing now as we transition into the 4/8 Asian session, respecting the ascending triangle’s support.

A break below 1.08 could signal bearish outlook at least in the short-term with the 1.0462 back in sight. This outlook strengthens if a subsequent pullback fails to break back above 1.09.

Now, if price pushes above 1.1050, we are looking at the daily chart for next resistance/targets.

EUR/USD Daily Chart 4/8
eurusd daily chart 4/8
(click to enlarge)

In the daily chart we can see that above 1.1050, 1.1270 is a key support/resistance pivot. We mentioned that the fundamentals suggest EUR/USD should remain bearish in the medium-term, so the short-term bullish outlook should be limited to 1.13, or at most the 1.1450 common resistance pivot (and also support in mid-January.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.