On its daily time frame, EUR/USD appears to be testing a resistance turned support zone between the 1.3800 and 1.3700 major technical levels. Trend analysis shows that this could hold for now, as the Ichimoku Kinko Hyo indicator is showing a market uptrend.
If that’s the case, EUR/USD might be on track to test its previous highs near the 1.4000 major psychological resistance level. Take note though that the green line looks ready to cross below the price, which is an early sell signal. So far this hasn’t been confirmed by the blue line yet, but the red line also seems to be indicating an end of the uptrend.
Using the Fibonacci retracement tool shows that the pair is stalling around the 50% level, which could hold as support. The next support levels are located around the orange lines, which are at the 1.3600 to 1.3700 areas.
Trend Analysis EUR/USD Outlook
On the other hand, EUR/USD weakness could mean a new trend analysis geared for a short bias. A break below the 1.3700 support could lead to a test of the former lows near 1.3400.
Bear in mind that the ECB is set to make its interest rate decision today and probably hint at further easing. A couple of ECB officials have previously suggested the idea of negative deposit rates or an expansion of the LTRO so that the euro zone economy can ward off deflation and prevent weak exports because of a high euro exchange rate.
Should Draghi echo this sentiment in today’s monetary policy announcement, the euro might be in for a world full of hurt. After all, the Fed is in the middle of its taper plan and has hinted at a potential rate hike six months after asset purchases end. This puts the euro at a weaker position compared to the US dollar.
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