EUR/USD Technical Analysis

Fundamental: The most important news for the pair was Ben Bernanke’s speech at Jackson Hole on the 31^st. The central bank still hasn’t clearly announced that the next round of Quantitative Easing will occur, and the conference suggested that it will stay on the side lines for the time being. QE depreciates the USD and appreciates the pairs, so a serious decline in the dollar is still away.

The chart above shows the USD with regression channels. The price is moving in a downward channel so far. Any confirmations of QE3 will pressurize the price to plummet further.

An important event to look out for is the announcement by European Central Bank president Mario Draghi, as he plans to introduce measures which should address the problems of Spain and Italy. These measures are likely to include buying bonds of the two nations to reduce their borrowing costs. EUR is currently strong in anticipation of these measures,however,if they are found to be ineffective the pair could plummet once again.

Technical:

Examining the H2 timeframe, EUR/USD has been rising weakly since the past week. A 10 day regression analysis shows that the pair is making gains and is currently staying on the above line of the channel. This is reflected by the current market view that ECB will introduce effective measures, and that the Fed may introduce QE3. 

Stochastics are currently bullish and edging towards 80, signalling that there may be some gains made in the coming day. MACD, however, is moving sideways – and even though it is currently bullish – it signals uncertainty in the market. 

EUR/USD is best traded on market news these days, as any sign of good or bad news shifts the price significantly. The bullish rally could easily be reversed due to the ECB; it is well known that the European Central Bank is quite divided and has yet not reached to a permanent solution.

On a closer view of the chart, the pair seems to be showing bearish signs. Friday’s close ended with a shooting star candle, and if the price breaks through the support line of 1.2425, a sell-off rally may occur. On the other hand, if the price exceeds the resistance lines of 1.2692 and 1.27, then long trades would be more favourable. However, a bearish mood exists for this week so any signals for shorting should be picked up.