After making a low on the year at 1.0462 EUR/USd has been consolidating. Then it popped up after the FOMC statement as the USD fell across the board. Let’s follow on the pair’s technical development since popping up to 1.10.
Confirming Further Bullish Correction:
The 1H chart shows the initial bullish reaction being faded. 1.06-1.0650 is a key area that involves the 200- and 100-hour SMA as well as a previous support pivot ahead of the FOMC.
The fact that buyers were able to keep this area as support suggests that in the short-term there is some further consolidation. In the near-term there is bullish bias as we enter the US session.
Note that price is now climbing above 1.07 and the cluster of simple moving averages. The ability to break above the SMAs then respect them as support is call a “bullish slingshot” signal. Plus, the 1H RSI has climbed above 80 to show bullish momentum, and is now holding above 40, which reflects maintenance of that bullish momentum.
Lastly, price action essentially respected the rising speedline from mid-February, keeping EUR/USD in a corrective mode. Let’s take a look at the 4H chart and assess possible targets.
3 Correction Scenarios:
Scenario 1 – Coiling (favored scenario): First , note that there is a resistance around 1.09. If price fails to break this level, we are likely going to see a triangle, or some kind of coiling pattern. I favor this scenario because I believe the FOMC reaction had strong volatility that we would not see in the next bullish correction swing. The market is still in consolidation, but it is likely that the volatility won’t match that of the FOMC-reaction.
Scenario 2 – Flat resistance: The second scenario is that bulls will be able to chew up the tail of the initial bullish reaction and reach the 1.1040 area. To me, if the market is able to reach this high, there is momentum to push higher and I would favor a third scenario.
Scenario 3 – ABC Correction: Because EUR/USD market held above 1.06, there is some bullish bias in the short-term. If volatility does not die out and keep EUR/USD under 1.09, the market might have enough juice to make another strong corrective move that matches the FOMC-reaction. That would put price near the 1.12 handle.
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