The president of the ECB, Christine Lagarde, stated at yesterday’s press conference that the economic activity in Europe has lost significant momentum in the fourth quarter with the surge in coronavirus cases adding to the already heightened level of uncertainty.
Beginning on the daily time frame, paying close attention to the latest candle closure, we can notice that we had a bearish engulfing with price finding support on the daily level that was illustrated in the previous post. Now that price found support, we can see the pull back that was expected. Price does look to be printing a double bottom, but one would have to wait for the daily candle closure for that to be confirmed. However, with very little changing from a fundamental perspective for the euro I still expect further downside on this pair.
Dropping down to the 4-hour time frame, one can see that price has been making lower highs and lower lows. We can see more clearly how well this pair reacted to the daily level that was plotted. We are now seeing the expected retracement with price moving towards the 61.8 fib level where we could potentially find resistance around the 3rd touch of the descending trend line. If there is no candlestick confirmation around the 61.8, we would look for a rejection off the 78.6 which would also line up with a retest of the ascending trend line. Downward targets are 1.70350 and then 1.69900.
Remember to always wait for candlestick confirmation around the areas you are looking to execute from in order add confluence to your trading. Subscribe to our blog to receive updates sent directly to your e-mail.