Technical analysis for EURUSD: 2nd January – 6th January 2017
The year 2016 has been a strong bearish ride for the EURUSD pair in the forex market. The pair has broken the 13 years low in the market. The first strong bearish move in the EURUSD pair was triggered during the event of the U.S presidential election held on 8th of November 2016.Mr .Trump statement regarding the rise in fiscal spending and tax cut policy gave the green buck’s solid boost in the global economy. In that event, the EURUSD pair broke its short-term bullish trend line in the market and started its bearish journey. In the last FOMC meeting minute, the FED have raised their interest rate on the basis of 25 points and this gives the dollar the strongest boost in the year 2016.
The U.S dollar index which measures the green buck’s strength in contrast to six major currency pairs touched the 14 years high in the market. Due to the immense strength of the green bucks, the EURUSD pair hit a critical support level at 1.03522.In the last trading week, the market has exhibit low volatility due the Christmas holiday as most of the traders were enjoying the holiday session. However, in last Friday there has been a huge bullish surge in the EURUSD pair and it eventually tests the critical resistance level at 1.06512.After the pair hit that level the sellers again took control of the market and drove the price down for near about 140 + pips in the market. Such dramatic fall in the EURUSD pair in the last trading session clearly indicates that the market is not ready for its bullish correction in the next week.
Daily chart analysis for the EURUSD pair
Figure: Technical parameter in the EURUSD pair
The EURUSD pair sharply falls in the forex market after hitting the critical resistance level at 1.06512 level in the market. The market was trying for a bullish recovery in the daily chart after hitting the critical support level at 1.03522.But in the last week, the rejection of the price from the 1.06512 level clearly shows that the bulls in the EURO pair have given up against the dollar. The price of EURUSD closed below the 21 days EMA in the daily chart and most of the professional traders are thinking that there will be a bearish movement in the EURUSD pair in the next week. The first bearish target for the EURUSD pair is the critical support level at 1.03522.From that level, we might again see a sharp rise in the price towards the 1.0530 level in the market. But if the pair manages to break that critical support level then we will see a large fall in the EURUSD pair which will ultimately lead this pair towards the 1.01512 mark in the market. For the bullish scenario the need to break the critical resistance level at 1.06512.A valid break of the price above that level will bring the bulls back in the market and the market will look for another bullish rally towards the critical resistance level at 1.0492.This level is going to provide a significant amount of selling pressure the EURUSD pair but if the buyers break this level then we will see a medium term bullish correction in the EURUSD pair in near future.
Weekly chart analysis for the EURUSD pair
Figure: Weekly chart analysis for the EURUSD pair
The EURUSD pair has broken critical support on the weekly chart but has found some bullish power in the market after hitting the critical support level at 1.03350.From that level, the pair started its bullish correction in the market after forming a Doji in the weekly chart. Most of the aggressive professional traders went long after indecisive candlestick formation since the green buck lost some of its momentum in the market after the recent fall of the U.S dollar index. In the last week, the EURUSD pair sharply rallied towards the broken trend line which has turned into a strong resistance level. In the last Friday, the pair found intensive selling pressure in the market after hitting the critical resistance level at 1.06512 and then lost its bullish momentum prior to the market closing.
In the weekly chart, we have a morning star pattern formation and most of the retail traders are going long into the EURUSD pair. Though the technical analysis is supporting the buyer at the current moment but most of the professional trader are staying on the sideline since the green bucks are extensively strong fundamentally. However, if the pair manages to break the critical resistance level at 1.06512 then we will see a nice bullish momentum in the market. The first bullish target for the pair would be the 21 days weekly EMA which is at 1.08069.Most of the professional price action trader will be looking to sell the pair at this level with bearish price action signal since the dollar is most likely to rally high in the next year. To be precise the dollar is most likely to hold its bullish momentum for the next week.
Summary: The new year trading session is going to start with a mixed sentiment for the EURUSD pair since technically the pair is in bullish moved but fundamentally it stills remain on the bearish side. Considering the technical and fundamental parameters, we will remain on the sideline in the next week. However, we will enter long into this pair if the price drops near the 1.03682 setting a tight stop loss just below the low of the critical support level.