After reaching a multiyear high last Thursday, with an RSI indicating overbought and a shooting star candle indicating an imminent drop in price, the dovish tone of Draghi´s language Friday morning immediately weakened the €, resulting in a significant drop for this pair. It fell over 100 pips during his speech and about the same amount during the rest of the day! According to Draghi, risks going forward are still substantial and more needs to be done to raise inflation fast.
The question before us: is this pullback temporary and will the market (after hitting the obvious support level) be looking for buyers OR will the support be broken and is more downside to come next week?
On one hand more weakness is to be expected for the Yen, due to the ongoing monetary easing by the BoJ. On the other hand more weakness is to be expected for the Euro, due to the talk of driving up inflation fast by the ECB.
My advise is to not chase a trade for this pair and to wait for now. Monday (24) is a bank holiday in Japan, Tuesday (25) morning Kuroda will speak at an international financial forum, potentially giving a new impulse to this pair. If a supportive candle will confirm the support level, I will be looking to buy it again. If however no support is found and the down side continues, I would short it first.
The question before us: is this pullback temporary and will the market (after hitting the obvious support level) be looking for buyers OR will the support be broken and is more downside to come next week?
On one hand more weakness is to be expected for the Yen, due to the ongoing monetary easing by the BoJ. On the other hand more weakness is to be expected for the Euro, due to the talk of driving up inflation fast by the ECB.
My advise is to not chase a trade for this pair and to wait for now. Monday (24) is a bank holiday in Japan, Tuesday (25) morning Kuroda will speak at an international financial forum, potentially giving a new impulse to this pair. If a supportive candle will confirm the support level, I will be looking to buy it again. If however no support is found and the down side continues, I would short it first.
You don´t need to be a weatherman to know which way the wind blows - B. Dylan