Prospective EURUSD levels to look at
Prospective EURUSD levels to look at based on previous highs as well as projection from a triple bottom chart pattern that is now very prominent. In addition a quick look at DXY.
Potential EURUSD targets/resistance levels to expect
EURUSD’s up trend is looking very persistent while the USD is falling.
Previous EURUSD highs now that 1.15 is done are 1.1711 and 1.1617. Based on the weekly chart candlesticks, (minus the extreme ends), we had the best end-of-week close last week. So that is a resistance that appears to be decisively put behind.
For a really amazing level to look out for, the best forecast is based on chart pattern. EURUSD printed a triple bottom look-alike chart pattern over the last two years and now the ‘neckline’ is decisively broken. The depth of this triple bottom is around 1000 pips (based on close, not extreme ends). Project this 1000 pips up from neckline places the next target at the 1.25 – 1.26 region.
This piece ‘Formations Triple Top and Triple Bottom‘ at Forex.Cat explains how this target kind of target price projection is done. Rather that a straight line up, expect the usual profit taking, retracement and consolidation price action between here and there.
Divergence between DXY action and policy direction
In the meantime, DXY (which has a near-perfect inverse relationship with EURUSD) is fast approaching the low end of it’s range since 2015 despite hawkish-dovish directions on interest rate hikes. It’s hard to take these statements seriously. Anyone remember that in December 2015, Yellen nearly promised 4 hikes in 2016 which became 2 some time before mid-year and then only one hike was actually done by end 0f 2016?
From a technical point of view, the bottom of this range is going to be a support for DXY. If this support holds, I expect to see DXY ding-dong up and down between 92 and 100 in that up-down-hike-no hike mode. I suspect that if the bottom breaks however, that is the point when the USD is going down hard, that even if the FOMC threatens more hikes, market does not believe anymore.
I mean seriously DXY should be rallying if the market is expecting more hikes. There is obviously a divergence here between market expectation and actual price action versus the kind of policymaker statements coming out.
Update – expect reaction to 52-week high
This is EURUSD weekly chart from late 2011 to present. As we can see, EURUSD is coming near to it’s 52-week high shortly. Based on observation of past instances, we can certainly expect some kind of reaction.