After the Unprecedented EUR/USD Rally, What’s Next?
Dec, 07th 03:43
The EUR/USD pair recovered in one day almost all what it lost in the previous four weeks, following, and maintained its bullish tone this Friday, despite the release of US positive employment data for November.
The shocking decision made by the ECB last Thursday has not only disappointed investors, but also generate another bout of uncertainty. Mario Draghi fell short of market expectations, by cutting further into negative territory the deposit rates, but maintaining the monthly amount of bond purchases intact, when the market had largely priced in a 10/20B extension.
From a technical perspective, the pair is now favored higher into next week, as it has broken, and found buyers on pullbacks, to the 38.2% retracement of the October/November decline around 1.0880. In the same chart, the technical indicators are stabilizing well above their mid-lines, still in their way to neutralize the effects of a 480 daily rally. Also, the 100 and 200 DMAs converge in the 1.1080 region, whilst the 61,8% retracement of the mentioned decline stands at 1.1120, making of the region a critical resistance area, and where selling interest is expected to resume.
Weekly basis, the pair remains below its 20 SMA, while the technical indicators have bounced sharply from oversold readings, but remain in negative territory, suggesting the current movement is corrective. Nevertheless, and advance beyond 1.1120 will likely confirm a bullish continuation in term.
The main support is now 1.0830, and a break below it should expose the pair to a test of the 1.0720 region, whilst below this last 1.0660 comes next.