Good morning traders.
For the week ahead, the first thing to mention is that the USDx is off its highs and maybe ready for some backtracking. Last weeks poor US industrial production and retail sales data resulted in a few comments from Fed heads talking about the need to hit the pause button re hawkish monetary policy moves via rates and balance sheet run off.
The USDx chart below shows the levels and zones we need to chop through to get a reasonable test further down the chart. The 96.40 to 60 zone as highlighted is the area to watch. If it moves down through here and the 38.2 Fib also contained within this zone 96.00 is the next level to the downside.
We also had The ECB talking about injecting fresh stimulus into the weakening euro-area economy via Targeted Long Term Refinancing Operations (TLTRO´s) suggesting the ECB is watching closely the recent poor run of data prints from the eurozone.
So it appears both central banks are in easing or wait and see mode mode which tends to diminish the monetary policy divergence between the two.
At the same time the hope of a trade deal between the US and China seems to be improving as the beginning of March and possible hikes in tariffs on Chinese goods looms closer by the day.
So we have an apparently more dovish Central Bank policy stance for both the US and Europe and improving risk sentiment.
However, the move in Fed language I think will have more of an impact than comments from ECB members at least initially and we could see some short term strengthening in the euro versus the US dollar. Given the bearish move in the eurusd over the past couple of weeks, its possible that a cautious move up might be on the cards.
With regard to our model strategy performance – the updated results are here.
We had trades triggered from levels last Monday and Tuesday and on Thursday we had decent bounces from the zones I posted on the charts. For this week I will post zones rather than precise levels. You can still trade them exactly the same way but I suggest you watch the reaction at these zones on the shorter time frame charts rather than employing a set and forget strategy while we are in these conditions.
The Daily Chart
We are still within the never ending range but the doji posted on Friday could be an indication of a false break below the wick lows seen on the chart as the key low was not tested. If we are to see some relief for the eurusd the usual suspects will be the key areas it needs to break, 1.1350 being the first R zone in line.
The Hourly Chart
Zones as per.
The 1.1340 ish level just below the R2 zone looks tempting as we kick off Monday morning if we are to push higher. There will be liquidity resting up here and it corresponds with the 38.2 Fib. I have noted a couple of possible scenarios should we retest the Sunday open low. If it holds then look for higher prices. If it breaks we could be looking again to retest lower.
As the US is on holiday today we may not get any definitive breaks or moves until the US are back on line tomorrow.
Good look and lets have a good week again :).