EUR/USD: Reached bullish target at 1.1280. Further upside towards 38% Fibonacci at 1.1790 after pullback
Economic Perspective
Euro side: European Central Bank (ECB) President Mario Draghi quelled any fears of an earlier-than-expected end to its bond-buying plans, as he upgraded short-term inflation forecasts. This was one the main reasons why we saw Mr. Euro dancing his butt up on the forex dance floor.
On top of reassurances on QE Mr Draghi also played down volatility in bond markets, saying quite simply ‘get used to it’. He is of the opinion that super low interest rates is going to result in heightened volatility and that this won’t be cause for any deviation from the QE policy path.
Journalists at the press conference get to ask Draghi two questions and just about every second question was on Greece, despite his first answer being ‘there is no point in me talking about negotiations that are currently ongoing’. What he did say though was that Greece needs a strong agreement and that a strong agreement should factor in social well-being and the foundations for economic growth, which seemed sensible. He also seemed more optimistic than not that a deal would be reached.
A deal hasn’t been reached yet though. They are close, according to both sides of the table, but last night talks ended with a hand shake and promises to continue. The Eurogroup have tabled a new deadline of the 14th June, so maybe we won’t see this wrapped up by Friday. The Euro was a lot stronger yesterday though , moving higher against all of its major peers as the market starts to celebrate early. At these levels we question how much more of a relief rally there would be if Greece did get a deal done.
Europe is reportedly going to extend its sanctions against Russia until the end of January. Officials say that they want to press Russia as hard as possible to fully commit to their side of the Minsk agreement. This comes as fresh fighting has erupted in the Donetsk region, with dozens killed, that the Guardian says could result in a return to war.
US Side: After the non-farm unemployment estimate provided by Automatic Data Processing, Inc. (ADP) yesterday, the NFP employment is THE market mover for Ms. USA coming up.The ADP’s estimate is usually used as a leading indicator for the government’s own estimate. As such, forex traders were expecting dismal results, so it’s quite understandable why the market hesitated when the government’s NFP reading was within expectations. If ADP and NFP conflict, then the market also becomes conflicted. But if they are in tandem, then the market usually moves hard and fast. The weekly initial claims are also hinting that the jobless rate will hold as expected while Fed officials are confident that wage growth will increase, so we could expect some volatility if the actual readings are way off the mark.
As the quote currency in the EUR/USD pair, a worse than expected NFP report would push the pair higher up on the forex dance floor.
Technical analysis: The pair danced all the way above and beyond a key resistance level of 23% Fibonacci at 1.1280 and remains above the Ichimoku cloud. Since we already saw Three Black Crows candlestick pattern, we could see an expected correction before more up-moves. The RSI heading up above the neutrality area. Next target is the 38% Fibonacci at 1.1790.
Trading Idea: Wait for the correction that could pull the pair back to 23% Fibonacci and pivot level of 1.1280. If the pair opens above this level on the next candlestick, that could be your indication for a bullish position towards 1.1478 and 1.1790 in extension.
Alternative Scenario:Below 1.100 look for further drops towards 1.055 and parity.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.1007 | 1.1280 | 1.1790 |
| 1.0550 | 1.1478 |
*Important Note: The support and resistance levels are not suitable for all traders and largely depend on your account size, margin and leverage. Book a private lesson to learn how to personalize your account based on our trading guide.
