Importance of 1,10+ and 1,11+
Not much to report on Price action, so far this year EURUSD has been one of the most boring instruments.
However there are a few "What if?" questions within the neutral zone, which highlight the importance of 1,10+ level.
Weekly:
- Ichimoku setup is neutral, as Price is still below Kumo, Kijun and in bearish trend, however Price action has failed to gain momentum in last 6 weeks. This is also reflected in flat Tenkan and Kijun lines, and in the forward Kumo, which is becoming really thin! This means that 52 weeks average (Senkou B - orange) has dropped quite a lot, while the 17,5 weeks average (Senkou A - green) has not changed
- The long term bearish trendline is very close to Price ard 1,10+. The flat Kijun Sen above is at 1,1115, and also the above mentioned Senkou B long term average (52 weeks) also down to 1,1088!
- Should Price break above trendline and the averages, a massive short squeeze could send price initially up to 1,14-1,15 area, where we still have 10 WMA and range top. This would break the major downtrend, but not necessarely start an immediate uptrend. Bears still have some chance, but for a trend continuation a lower low below 1,0485 is needed, or else the wide range stays.
- Heikin-Ashi simply shows undecision in the middle of the range. haDelta at zero.
Daily:
- Ichimoku is still same neutral. Actually it could not be more neutral than this, so within a few days market will have to decide which way to break out... Obviously ECB and/or risk on-off sentiment can be the trigger short term.
- Possible bull flag is still on the chart. As you see 1,10 is relly important for bears to hold! Last friday Price almost broke above the flag and 100 WMA, but action faded into the close
Above 1,10 we again have a trendline around 1,110
- Heikin-Ashi has some minor bullish bias, but in fact still shows undecision
- EWO at zero.
Euro has jumped higher on all crosses in last few weeks, except EURUSD and EURJPY. JPY is understandable due to safe haven buying and carry unwind. But vs USD as you see it is a big question. I have a view that EUR can be the next "JPY", in case of risk-off sentiment weighs further on markets, strategists may start to unwind short EURUSD positions too at some point. Don't forget, EUR has been a funding ccy with negative rates... meanwhile the Eurozone still have a C/A surplus.
What can we expect from ECB this week? Obviously Draghi will talk dovish for sure... question is what it will be enough for, if he talks only, but doesn't make any serious steps. To make it clear, they need to keep some kind of credibility, and wait for further datas in coming months, most importantly examining the effect of recent oil price drop on inflation, etc. And also, until periferia bond yield spreads are not widenning, they are not really worried. Draghi would be more worried with Italy 10y +200 bps above Bund and with EURUSD at 1,15+. Then they would implement some new measures for sure.
On the other side just immagine what happens if the FED sometimes start to talk less hawkish, or maybe even dovish! Now they still seem to stick to hiking rates (while US datas are rather so-so, not so shiny), but hey, was not it same with BoE few months ago? (hikehikehikehikehike....eeee.... maybe not) :-) Look where has EURGBP spiked from 0,70.
Anyway, don't worry about guessing all these things. Just trade the price action and the confirmed breakout in case!
However there are a few "What if?" questions within the neutral zone, which highlight the importance of 1,10+ level.
Weekly:
- Ichimoku setup is neutral, as Price is still below Kumo, Kijun and in bearish trend, however Price action has failed to gain momentum in last 6 weeks. This is also reflected in flat Tenkan and Kijun lines, and in the forward Kumo, which is becoming really thin! This means that 52 weeks average (Senkou B - orange) has dropped quite a lot, while the 17,5 weeks average (Senkou A - green) has not changed
- The long term bearish trendline is very close to Price ard 1,10+. The flat Kijun Sen above is at 1,1115, and also the above mentioned Senkou B long term average (52 weeks) also down to 1,1088!
- Should Price break above trendline and the averages, a massive short squeeze could send price initially up to 1,14-1,15 area, where we still have 10 WMA and range top. This would break the major downtrend, but not necessarely start an immediate uptrend. Bears still have some chance, but for a trend continuation a lower low below 1,0485 is needed, or else the wide range stays.
- Heikin-Ashi simply shows undecision in the middle of the range. haDelta at zero.
Daily:
- Ichimoku is still same neutral. Actually it could not be more neutral than this, so within a few days market will have to decide which way to break out... Obviously ECB and/or risk on-off sentiment can be the trigger short term.
- Possible bull flag is still on the chart. As you see 1,10 is relly important for bears to hold! Last friday Price almost broke above the flag and 100 WMA, but action faded into the close
Above 1,10 we again have a trendline around 1,110
- Heikin-Ashi has some minor bullish bias, but in fact still shows undecision
- EWO at zero.
Euro has jumped higher on all crosses in last few weeks, except EURUSD and EURJPY. JPY is understandable due to safe haven buying and carry unwind. But vs USD as you see it is a big question. I have a view that EUR can be the next "JPY", in case of risk-off sentiment weighs further on markets, strategists may start to unwind short EURUSD positions too at some point. Don't forget, EUR has been a funding ccy with negative rates... meanwhile the Eurozone still have a C/A surplus.
What can we expect from ECB this week? Obviously Draghi will talk dovish for sure... question is what it will be enough for, if he talks only, but doesn't make any serious steps. To make it clear, they need to keep some kind of credibility, and wait for further datas in coming months, most importantly examining the effect of recent oil price drop on inflation, etc. And also, until periferia bond yield spreads are not widenning, they are not really worried. Draghi would be more worried with Italy 10y +200 bps above Bund and with EURUSD at 1,15+. Then they would implement some new measures for sure.
On the other side just immagine what happens if the FED sometimes start to talk less hawkish, or maybe even dovish! Now they still seem to stick to hiking rates (while US datas are rather so-so, not so shiny), but hey, was not it same with BoE few months ago? (hikehikehikehikehike....eeee.... maybe not) :-) Look where has EURGBP spiked from 0,70.
Anyway, don't worry about guessing all these things. Just trade the price action and the confirmed breakout in case!
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