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Dollar in a downpath

Market Analysis

EURUSD, H4

The dollar has remained on a downward path.  The buck’s weakness follows soft initial claims and durable orders data out of the U.S. yesterday, which were followed up by the minutes to the recent Fed meeting saying that “with core inflation readings continuing to surprise to the downside…many participants observed that there was some likelihood that inflation might remain below 2% for longer than they currently expected.” While the minutes still left the path clear for a 25 bp rate hike at the upcoming December FOMC, the minutes and persisting backdrop of benign inflation has left markets questioning the potential for further tightening in 2018, which is seeing forex markets adjust positioning accordingly. More of the same seems likely for now. U.S. markets are absent today, and conditions will remain relatively thin until next week now.

EURUSD logged an eight-day high of 1.1846, with the pair rising on the back of broad dollar weakness.Hence with USD weakness to be continued today, two entries have been taken in EURUSD and USDJPY. The EURUSD broke yesterday the Falling wedge seen since  November 15, while it also closed above the round level of 1.1800, by breaking the 50-DAY MA. Therefore with Daily RSI at 61 configuring positively, a Long entry was taken at 1.1840, with Targets at last week’s high at 1.1860 and 1.1880. After the bullish hammer seen in the Daily chart, the pair is likely to retest the strong resistance seeing the last 2 months, at 1.1880. Support is at 1.1800.

Nevertheless, a break and close above these levels would swing the scopes back on the 1.2000 level. However this view is tempered by the political risks in Germany.

 

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Andria Pichidi

Market Analyst

HotForex

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