The US dollar has had a good couple of days, strengthening on all G10 crosses. Various reasons are given, including the demise of Donald Trump. A more likely reason for the break of support in EURUSD yesterday was the widening yield gap in favour of the US as markets warm to the idea of a December 14 rate hike (now a 70% implied probability).
Meanwhile, last week’s rumour that the European Central Bank was discussing a possible tapering of quantitative easing has been discredited. Later today we will see the minutes from the FOMC’s last meeting, when three of the 10 members voted for an immediate rate increase. A record of the discussion will show how close the three hardliners were to convincing their colleagues to see it their way.
On Friday afternoon the committee chair, Janet Yellen, will give more insight into the group-think via a prepared speech. A few hours earlier the September retail sales numbers will be released.
Eurozone industrial production numbers are due out in a few hours time but are unlikely to be market-moving.
Management and risk description
From an Elliott Wave perspective, the euro is interpreted to be undergoing its next “swing trade” to the downside; within a wave (d) decline toward the mid 1.0600s area (see daily and weekly charts below).
From a classical charting standpoint, EURUSD has completed a multi-week descending triangle pattern, with a downside objective of 1.0895.
Resistance now lies at 1.1100/1.1120 and ideally this will now contain to yield sell-off towards 1.0985 en route to 1.0915/1.0895 (and the mid 1.0600s).
Entry: EURUSD is today seen as a sell at market (1.1058) and again at 1.1086 (if seen).
Stop: 1.1124, initially.
Time horizon: Allow several days at least.
EURUSD daily chart (click to expand)
EURUSD weekly chart (click to expand)
— Edited by Susan McDonald
Non-independent investment research disclaimer applies. Read more