During the 1/22 session session, the ECB announced details to the the much anticipated QE program and they did not disappoint and dragged down the euro. With a pace of $60 billion euros a month from March to at least September next year, Mario Draghi and his colleagues have laid out at least $1.1 trillion euros for sovereign bond purchases.
The EUR/USD consolidated ahead of the event risk as we can see in the 4H chart. After the announcement, the market sold the euro sharply and the EUR/USD has now fallen to almost 1.10. A this point, if there is any pullback, be aware of resistance in the previous support area around 1.15.
When we take a look at the monthly chart, we can see that price was at 61.8% fibonacci retracement level at 1.12. The RSI is in oversold condition. There has been a choppy decline since 2008, but there was an uptrend from 2001-2008, so in the long-term, EUR/USD can be said to be “neutral”. Because it is not considered bearish in the long-term, we might want to anticipate a period of consolidation/bullish correction now that the market is trading around the 61.8% retracement level.
Again, if there are any bullish outlooks, first limit it to 1.15. Now the next key support below 1.10 is the parity level, 1.00.
Let’s take a look at some other long-term charts:
Due to the Bank of Japan’s deep and persistent stimulus action, the Japanese Yen has been bearish across the board for a while now. It did start to consolidate in December and through January. The EUR/JPY monthly chart shows a sideways market in the long-term that has been bullish since 2012. However, this bullish outlook has ended by the price action in the past couple of months. In the short-term, the 128.80-130 area contains support factors including 38.2% retracement. Below that, the 120-121.83 area contains the next set of key support factors including the 50% retracement level. Let’s limit the bearish outlook to 50% retracement for now, unless the BoJ shifts monetary policy away from its currently loose stance.
The EUR/GBP has also been falling sharply. The monthly chart shows the pair approaching key support factors .There is a previous resistance pivot in the 0.72-0.72555 area , which also involves the 61.8% retracement.
To the upside, if there is a pullback, watch out for resistance in the 0.7750-0.78 area, which was previous multi-month support.
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