The FOMC statement is causing the US Dollar to make a serious retracement within its uptrend. Will this turn out to be a bearish correction… Or could it be true that the trend on the USD is over? This and more in today’s blog…
EURUSD DOWNTREND IN TROUBLE?
The EURUSD downtrend has been quite spectacular so far: it has lasted almost a year now and has declined a whopping 3,500 pips.
Last week’s FOMC event, however, was interpreted by the market as USD bearish and hence the EURUSD moved up nearly 500 pips (!) in 1 day. It seems that the uptrend is catching its breath… but for how long?
Considering the fact that last week’s weekly candle ended up bullish as well (purple circle in screenshot) and showed a candle stick pattern (bullish engulfing twins), it seems more probable that a consolidation or slight upside / bullish correction could take place.
I am therefore inclined to make the following conclusions:
- This bullishness is an important signal because it is the very first strong bullish candle since the beginning of the downtrend.
- In the short-term I am therefore cautious and expect price to make a consolidation or some slow correction to the upside.
- In the long-term however the Euro fundamentals and technicals remain bleak and weak and I am expecting the downtrend to continue.
There is a confluence of resistance which is marked by the 2 boxes (red and dark red). Ultimately if price gets up that high then I am expecting a turn around again in this zone (green and red arrow). For the moment I would rather not stake a position or take a trade on the current charts… but in the long run bearish targets are in vision.
The GBPUSD and the EURUSD pairs have many similarities: first of all, they both are in strong down trends and secondly, they both had quite strong bullish reactions to the FOMC statement.
In this regard the GBPUSD could struggle with the downtrend as much as the EURUSD could. In fact on the 4-hour chart a contracting wedge chart pattern is visible.
These 2 trend lines are important levels to keep an eye on. A break of the resistance indicates a bullish breakout (blue arrow) whereas a break of support indicates a bearish breakout (orange arrow).
The Great British Pound is at the moment slightly more bearish than the Euro but this is an uptrend that could run into a major confluence of Pivot Point resistance zone. The EURGBP is running into many broken bottoms from the past and this could certainly send the EURGBP back down, see the chart below. This could be certainly an interesting short zone, but I do want to see price action confirmation appear on the chart before taking the setup.
What do you think of the EUR, GBP and USD?
Let us know down below!
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