EUR/USD: Double Bottom Forms
Alpari | Jul 22, 2016 05:56AM ET
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The euro/dollar on Thursday closed slightly up after the ECB’s Mario Draghi spoke. His speech turned out quite balanced. The euro/dollar first technically headed to 1.1060 and then returned to 1.0979. By trading close, quotes had stabilized by the balance line at 1.1020. Draghi said nothing new and didn’t make any announcement about additional expansion of the bank’s asset-purchasing program.
Additional pressure on the euro came from US stats in the evening. Home Sales in the US secondary market in June rose fast. According to the most recent data, sales of housing in the US secondary market rose by 1.1% MoM in June to 5.57 million homes for the year (forecasted: 0.7% rise to 5.51 million).
Market Expectations:
The euro/dollar is trading at 1.1029. Today I’ll take a punt using the technical analysis and say the euro will rise to 1.1058 Today is Friday, so market participants could ignore the news and close part of their short positions on the euro before the weekend.
Day’s News (EET):
- From 10:00 to 11:00, European PMIs in the industrial and service sectors for July;
- 11:30, UK business activity index in the manufacturing sector for July;
- 15:30, Canadian CPI for June and retail sales for May;
- 16:45, US preliminary PMI data in the industrial sector for July;
- 20:00, Baker Hughes data on operative drilling rigs.
Technical Analysis:
Intraday forecast: minimum: 1.1016, maximum: 1.1058, close: 1.1043.
After the ECB meeting and Draghi’s press conference, a double bottom formed on the hourly. I want to draw your attention to how the same thing happened on 20th July, but was less back then. This time there are 31 bars between the bottoms, as opposed to the 11 bars on 20th July.
Yesterday’s daily bar ended up external in comparison to the previous bar. This means that traders will work to leave the 1.0979-1.1060 price range.
If there’s a sharp weakening of the euro against the dollar, any fall of the rate below 1.0979 will mean we should expect a sharp rebound to 1.0955, as we saw on 20/7.
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