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EURUSD – Seeking Confirmation of Monday’s Break

We’re seeing a rebound in the dollar following a strong start to the day following comments from FOMC voting member William Dudley, who claimed that a September rate hike looks less compelling.

While this isn’t necessarily a surprise given the extreme levels of market volatility as of late and growing concern over emerging markets and how that may impact the US, the acknowledgement of it did hit the dollar.

The end of the week will see attention back on the Fed with a number of policy makers due to speak including vice Chair Stanley Fisher at the Jackson Hole Symposium. Similar acknowledgements from other policy makers would make a September rate hike far less likely, bringing December into focus. As Dudley noted, there is a desire to raise rates this year if possible.

EURUSD Daily [1]

The euro had broken back below 1.14 against the dollar prior to Dudley’s comments, wiping out gains made during Monday’s rally which was driven by the unwinding of carry trades. The quick reversal of this rally could suggest that sentiment is not as bullish as Monday’s move would suggest.

That said, the pair is yet to close below 1.14 and a failure to do so would actually act as confirmation of the break, in effect lending credibility to Monday’s move.

On top of that momentum appears to still be firmly to the upside, which would suggest the bulls are not yet done. A break of the trend line on the stochastic may be an early sign that momentum is shifting.

Finally the 4-hour chart also looks quite bullish with the pull back over the last couple of days forming a falling wedge, a bullish formation. A break above this could spark another strong rally higher.

EURUSD 4hr [2]

Open Position Ratios [3]

Historical Position Rations [4]

The above tools and others can be found in OANDA Forex Labs [5].

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam [9]

Senior Market Analyst, UK & EMEA at OANDA [10]
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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