In result of the previous trading session, the currency exchange rate slipped through the updated 23.6% level at 1.1679 and, in essence, made a rebound from the bottom trend-line of a dominant . Due to absence of any fundamental data releases, bulls are likely to try to return the rate back to 1.1643, at minimum.
However, the further recovery of the Euro seems unlikely because of a combined resistance formed by the monthly S1 at 1.1658, the weekly PP at 1.1674 and the falling 55-hour . The southern side, in contrast, remains barrier-free. In addition to that, there is couple of fundamental factors that incite further appreciation of the Dollar, such as Donald Trump’s tax reform and possible nomination of John Taylor, as the Fed chair.
In line with expectations, the Euro continued to successfully recover against the Dollar until it met the first line of defence set up by the monthly S1 at 1.1658. Nevertheless, a pressure from the 55-hour SMA is likely to provoke the pair to make another attempt to break to the top.
On the one hand, a combined resistance formed by the weekly PP at 1.1674 and the 100-day SMA represent too strong barrier to be so easily crossed. On the other hand, the exchange rate two days ago made a rebound from the bottom edge of a senior descending channel.
From this perspective, the pair is expected to climb upstairs for some while. An additional impulse might be provided after today’s release of the Euro Zone’s inflation data.
Despite a release of various macroeconomic data yesterday, including the Euro Zone CPI and CB Consumer Confidence, the pair did not make any sharp moves and continued to move horizontally between the 100- and 55-hour SMAs. Such indifference nicely illustrates how traders are anticipating the upcoming FOMC Monetary Policy Statement and appointment of the new Fed Chair by President Trump.
Given that yesterday’s information appeared to be better than expected plus general consensus that today’s meeting will not bring any unexpected news suggests that the pair is likely to continue moving horizontally between the 1.1658 and 1.1625 levels with a tendency to stick to the southern direction. A major breakout to the top also looks unlikely because that side contains multiple barriers, such as the monthly and weekly PP or the 100% retracement level and 200-hour SMA.
Contrary to expectations, none of the yesterday’s fundamental events led to notable price movements. In other words, the currency rate remained in a limbo between resistance at 1.1658 and support near 1.1610 that formed three days ago.
The reason behind such weak reaction might be attributed to quite expected result of the FOMC meeting, which underlined solid economic growth, and anticipation of announcement of the next Fed Chair. Once this happens, the balance between bulls and bears will be distorted and the pair is likely to make a long awaited breakout.
On the other hand, it already feels the pressure from the 55- and 100-hour SMAs, which are trying to push it towards the weekly PP at 1.1674. However, there are also signs of formation of a junior ascending channel. In that case, a rebound is expected to follow.
The US President Donald Trump named Governor Powell as the new Fed Chair yesterday. However, markets showed little response to this decision, as it was widely expected. The news that actually moved the currency rate was disclosure of some details of the new tax reform.
From technical point of view, the weakening of the buck resulted in formation of a junior ascending channel. However, the exchange rate is likely to fail to surge to its upper boundary, as that path is blocked by a combination of the weekly PP at 1.1674 and the falling 200-hour SMA near 1.1682.
The likelihood of a rebound is also supported on daily chart where the pair additionally faces the 23.6% Fibonacci retracement level at 1.1679. Plus the average market sentiment remains 59% bearish.