The EUR/USD pair has been correcting it’s downfalls on the forex dance floor, but what’s in store for the pair in a long run? I’m reaching out to the Invest Diva Diamond Analysis to analyze the scenario from different points; in this case, Greece, China and FOMC play a part, and together with the technical chart analysis, give us 5 signals for the pair’s fate.
1- Euro side:
Greek Prime Minister Alexis Tsipras is under pressure to show how far he’s willing to go to keep Greece in the euro while European power gang are pretty skeptical about his ability to deliver tough reforms. Greece deadline for a debt deal is coming up rapidly and Mr.Euro is tip-toeing around a consolidation area against his major dancing partners before a concrete result it out.
2- China’s Side
I know, we are talking about Mr. Euro and Ms. USA and Chinese shenanigans seems to have no place in our discussion. But don’t forget, China is the world’s second largest economy and with predictions of Chinese currency, Renminbi, losing 10% of its value against the US dollar, the US Fed officials could change their mind about a rate hike this year.
Chinese investors fell into another “panic selling” syndrome on Wednesday, successfully crashing China’s stock market. Chinese government has been doing everything it can to boost confidence, like easing rules for insurers to invest in blue-chips stocks, raising margin requirements for short positions against small-cap stocks and warning against “irrational selling,” but who will listen?
3- US Side:
The details of June’s FOMC meeting was finally out yesterday, signaling that the Fed rate hike could be delayed because of concerns over Greece and China. If they were cautious of a rate hike back in June, what could they be thinking now that things are getting out of hand?
FOMC members also decided to give forex market watchers better clues on future policy adjustments in their next announcements. They decided to issue an “implementation note” or a separate statement that would contain more details on the specific measures to be implemented. This would cover “operational details regarding the settings of the policy tools and changes in administered rates being employed.” Now that’s something to look forward to in their next statement!
Regardless of all the rate hike delay talks, Ms. USA could continue to be in good shape because all these global turmoil can make HER the champion of the forex dance floor (aka safe haven)
4- Short Term Outlook
Mr. Euro has remained inside the Ichimoku cloud for 4 days as he dances against Ms. USA on the forex dance floor. But the EUR/USD pair wasn’t able to break above the key resistance level (and our bearish entry level of 1.11 and sharply declined after testing the barrier during Thursday’s London session, and remains way below the 23% Fibonacci level. On the 4 hour chart it seems like the correction is about to be over and engulfed by a Bearish Engulfing candlestick pattern.
5- Long Term Outlook
We could see further zigzag for a few days until things settle with Greece, but zooming out into the monthly chart we realize that this could be a minor setback in the pair’s parity fate, where it could go as low as the lows of 2002, below 1.00 and beyond.
Alternative Scenario: Above 1.11 look for rallies towards 1.12 and 1.15.
Where I’m setting my stops and limits:
|Support Levels||Turning Point||Resistance Levels|
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