Good morning traders.
Last week saw our pair kick off on the positive side with a 3 day drive upwards after a strong candle to close out the previous week. This to all intents and purposes gave the impression that we maybe considering a break to the upside of the range and perhaps even a break higher. However, we again closed out the week back below the 1.1460 level (only just at 1.1453 to be precise) which has capped the pair for the past 4 months apart from a brief foray up to 1.1550 in early January.
With nothing of any note on this weeks economic calendar, there is little that might propel prices any higher above this pivotal level barring any left field shock to the system.
From a bigger picture perspective we seem to be faced with central banks back pedaling on any imminent curtailment of accommodation with both the Fed and the ECB sounding much more dovish of late than we might have expected coming into the end of last year.
In the eurozone we are starting to get the message that all is not well with the German economy, the engine of Europe, and any chances of Draghi raising rates is being pushed out to 2020.
In the US the Fed has signaled a switch in stance with a more patient and balanced approach to any further rate hikes this year and a change in its balance sheet policy which it signaled may become an active monetary tool again should it be required.
With China appearing to slow and the continued trade tensions between it and the US, the global picture paints at best a static picture in growth terms with no apparent reason to see a switch to aggressive ´risk on´ sentiment.
With regard to Brexit and the potential negative economic impact this could unleash on the eurozone we appear to be in state of impasse.
The UK Govt. is 8 weeks or so away from crashing out with no deal and the picture looks less and less clear by the day. If there is a ´default´no deal exit at the end of March (which I doubt but who knows) I´m not sure anyone has any real understanding of what might unfold for the euro (let alone sterling) but I can’t imagine there would be much on the positive side.
Consequently I think traders are wary of pricing the euro much higher against its counter parts until Brexit is ´sorted´ one way or the other.
On balance then I can´t see any fundamental reason for the euro to spring into action to the upside. In which case we are left with having to continue trading the range as we have been doing for the past 4 months or so. So essentially we are buying low and selling high points within the range at decent reaction levels. Until we see any indication that any form of break out trade is on the cards we have to trade the range.
Of course we trade what we see each day and we could get a technical reason to test higher but in my view there´s nothing to suggest that from a bigger picture point of view.
With regard to our model strategy performance we had a very quiet week to close out January with one loser of -13 on the books. We did however, end the month in profit. See updated performance here.
For today the charts are marked up below.
The Daily Chart
From the Daily chart we can see that we are firmly stuck in the 1.13 to 1.1550 range. I for one can´t see any particularly good technical reason for either side to gain the advantage. In fact it can sometimes be an error to look too closely to try and find something that´s not there. Maybe others can see something I can´t but for me it could go either way!
There is perhaps a good level around the top of the last strong bull candle at 1.1390 ish marked by the green arrow for anyone looking to try a swing on the daily. Other than that I see little to give me any clues. The range does look to be firing up for a break to the upside but until I see something more strongly indicative of such a move we are firmly range trading.
The Hourly Chart
Levels as per.
Given what I have said above – its a tough call to put any strong weight on these levels.
If you are able to be at your charts it will give you a much better feel for what is likely to unfold this week. It is sometimes difficult to have any real conviction for levels in such conditions as we really should be looking at areas or zones rather than specific levels and the subsequent immediate price action but I know that if you cant be at your charts you need a defined level to enter on.
Have a good day amigos and if you´re not comfortable with taking any trades today it might be wiser to hold off until tomorrow. Who knows the clouds may have parted by then. We can always live in hope – just not a good idea to trade hope :).