Good morning and happy New Year traders. Trust you all had a good break and are raring to get back in the ring.
I know its traditional for bloggers, analysts and anyone who writes anything for anyone else to read to kick of the new year with a wistful look back and a few homilies to kick off January but as I´m sure you will read plenty of that stuff, I´ll stick to the job at hand. Suffice to say 2018 is over.
What´s done is done and can´t be undone (to paraphrase the Bard) so let it go and focus only on what´s ahead.
Right, that said, lets get to it.
From a chart perspective we closed out the year just about at the top of the last two and a half month range at 1.1465. We have been stuck in the 1.13 to 1.1450 range range for about 10 weeks now so it would be natural to expect that we are going to get some type of test or break out one way or the other at some point soon.
Whether this occurs and to what side (although a test to the upside looks likely first) is uncertain as by and large the fundamentals between Europe and the US remain the same.
Basically, the US is on a rate hike path (although somewhat less aggressively than had been previously thought) and the ECB is not excepted to take any action on rates until at least Q3 or Q4 2019. So we continue to diverge in monetary policy terms.
On the other hand, there is some speculation that the USD could weaken in the near term due to the political headwinds currently buffeting the Trump administration which could aid a move up in the eurusd.
However, given that fundamentals are complex right now with:
- trade wars
- a slowing Chinese economy
- weakening data from the eurozone
- US inverting yield curves
- Fiscal policy uncertainty on both sides
- political uncertainty in many areas (partial shutdown of the US Govt., Mueller investigation, Brexit, Italy and France budget deficits),
the best course of action for short term day traders is not to over complicate or over think the situation and trade what we see.
In which case although my instinct and the charts tells me that a move up is on the cards as we move out of the gate in January I will trade my levels and patterns as always, keep a tight grip on risk in any trade and be ready to change my view should price action dictate.
In a nutshell we continue into 2019 as we left off 2018. Plus ca change as the saying goes!
The Daily Chart
The Daily chart above shows the key daily levels I´m looking at. We have continued to push up from the 1.1450 and the next resistance levels above are at 1.1550 and 1.16. Any move back below to close under 1.1450 could be indicative of this move being more of a failed break up. I will be watching the closes over the rest of this week.
The 4Hourly Chart
I´ve posted the 4 hour chart this morning as it´s easier to see the levels than on the 1 hour. However, I will still be taking trades on the 1 hour. I have not posted 1 to 3 S & R levels as I want to see how the pair performs over the next day or so before it becomes a little clearer. That´s not to say there won´t be any trade opportunities. There will be and any dip back to the ´m´ (monthly open level as noted) could be a good first attempt to get long.
Perhaps the best thing to do after the break is to give the chart time to unfold and yourself time to get back in the swing of things before attempting trades. I will be back to posting my normal S & R next week from the 7th.
Here´s to a good year amigos :).