Today the pair reached the level of 1.1430. Euro continues to strengthen in view of Mario Draghi’s statement about the restoration of the European economy and the necessity to monitor the situation for possible changes to the ECB policy. On Wednesday the representatives of the regulator tried to calm the market down by stating that investors had misinterpreted the words of the head of ECB and that there would be no tightening of the monetary policy in the near future. However, the pair’s correction after that was short-term, and EUR went up again.
The weakening of the US currency was caused by a number of other factors. The postponement of the vote on the medical reform in the Senate indicates the continuation of instability in US administrative structures and possible difficulties in the implementation of the future tax reform. Dollar was under additional pressure from the statement by the head of the Bank of England Mark Carney about possible winding up of monetary stimulation in the near future.
On Tuesday attention should be paid to the release of the data on US GDP in Q1 2017. The indicator is likely to meet the forecasts and to make up 1.2%.
Support and resistance
The price has reached the support level of 1.1430 and is trading around the upper border of the upward channel (D1). Moreover, it has reached the upper border of the wide lateral range that it has been testing since March 2015 (W1) without success. In these circumstances one should be cautious about opening long positions, although there is potential of movement to the levels of 1.1530 and 1.1610. The correction of the price to the levels of 1.1250 (middle line of Bollinger Bands) and 1.1170 (Fibo correction 23.6%) is more likely. Technical indicators also show possible beginning of correction. Stochastic has reached the overbought zone. MACD histogram is growing in the positive zone but shows signs of “bullish” divergence with the price chart.
Support levels: 1.1250, 1.1170, 1.1100.
Resistance levels: 1.1430, 1.1530, 1.1610.
In the current situation short positions may be opened from the level of 1.1370 with targets at 1.1250, 1.1170 and stop-loss at 1.1420.
If the price consolidates above 1.1430, long positions could be opened with take-profits at 1.1530, 1.1610 and stop loss order at 1.1380.