Technical analysis for EURUSD: 12th December – 16th December
There has been a massive in the EURUSD pair in the last week after the ECB president Draghi came up with a dovish statement. Though the EURO showed significant amount strength in the market but after the critical resistance level at 1.08600.From that level, the pair found immense selling pressure in the market and started its bearish movement in the market. The next is very important for the EURUSD pair since the ongoing pending interest rate hike decision by the FED will most probably resolve in the upcoming FOMC meeting minutes. The last two-month performance of the U.S economy was significantly great and investors are thinking that the FED will hike their interest rate in the month of December.
However, the last two-week economic performance was not that great for the U.S economy. According to the FED rate hike monitor tools there 91.3% chance that the FED will hike their interest rate in this upcoming FOMC meeting minutes. To be precise there not a single major economic news release for the EURO in the next week which means investors will be cautiously waiting for the FED rate hike decision. Previously the EURO has managed to find bullish pressure in the market at such a low level and investors are still thinking on the historic bounce from such a low level. But the fundamental factors is strongly indicating a bearish move in the EURUSD pair in the next week.
Daily chart analysis for the EURUSD pair.
Figure: Technical parameter in the EURUSD pair
The EURUSD pair found some in the market after hitting the critical support level at 1.05000.The pair started its initial bullish correction in the last week but after hitting the critical resistance level at 1.08600 the pair falls drastically in the market. Last week the pair managed to close above the critical support level at 1.05000 which indicates that the bears are not in the full control of the market. If the critical support level at 1.05000 level holds then we will again see a decent bullish move in the EURUSD pair towards the critical resistance level at 1.06860.A clear bullish break of that level will bring further bullish momentum in the market which will ultimately target the key resistance level at 1.08600 level. However the daily stochastic is still in the selling mode and investors are waiting for an oversold stochastic in the Daily chart. If the critical support level at 1.0500 levels fails to restrict the bearish move in the market then we will see a drastic bearish move in the EURUSD pair. The first target will be the critical support level at 1.04560.From that level, we might see some bullish movement in the EURUSD pair but the sellers are most likely to break that critical support level. On the other hand, the 100 and 200 days daily SMA is also diverging at the current moment which is clear indication of fresh selling pressure in the market.
Weekly chart analysis for the EURUSD pair
Figure: Weekly chart analysis for the EURUSD pair
In the weekly chart, we are currently seeing a nice bullish morning star pattern formation at the weekly trend line support level at 1.05599.However, in the last week, the pair tried to rally high but failed miserable after hitting the critical resistance level at 1.08577.From that level, the pair managed to find a significant amount of selling pressure in the market which again drove the price back towards the trend line support zone. The upcoming week is going to play an important role in the EURUSD pair since FED is most likely to hike their interest rate in their FOMC meeting minutes. A hawkish hike in the interest rate will surely break the critical support level of the EURUSD pair and we will see a massive downfall. But if the FED comes up with a dovish hike then we might see a ranging movement in the EURUSD pair for the next few weeks.
Currently, all the traders are cautiously waiting for interest rate decision by the FED since it will be the key price driving catalyst for the EURUSD pair. But if the key weekly support level at 1.05599 holds then we will see a nice bullish correction in the pair towards the 100-day daily SMA in the weekly chart. The dynamic resistance is situated at 1.10821.Currently, the price is trading too close to the support level and entering short in the EURUSD pair will not be a good decision in terms of risk reward ratio. Professional price action traders are cautiously waiting for the bullish retracement of the pair towards the key resistance level at 1.10821 to enter short with bearish price action confirmation signal.
Summary: EURUSD is one of the most traded currency pairs in the forex market. Currently, the pair is at critical conditions since the key support level at 1.05076 is being frequently tested by the market. A clear decisive break of the support level will bring strong bearish rally in the market. Most importantly the FED is going to release their interest rate decision in their next week FOMC meeting minutes. Investors around the world are doubted whether the FED will help the EURU to break this significant support level in the market. Considering all the parameters, the overall condition for the EURUSD pair still remains bearish in the market. However, the current risk-reward ratio argues against going short at the current price level. We will stay on the sideline and wait patiently until the market presents better trading opportunity.