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EUR/USD analysis: all hell broke loose

Written Valeria Bednarik | 2018-01-10 07:11:34 GMT

It has been quite some time since China was able to shake the FX board, but they came back to remind us all why they are considered the world's second -largest economy. Dollar's persistent strength during these last few days was wiped out in a blink on news reporting that Chinese officials, who are reviewing China's FX holdings, have recommended slowing or halting buying of US Treasuries, according to "people familiar with the matter." The slow dollar's pullback turned into a massive sell-off of the American currency, which resulted in the EUR/USD pair regaining the 1.2000 threshold after trading as low as 1.1915 late Tuesday. Stocks are plummeting with the news, bonds are down, resulting in yields soaring. Commodities such as oil and gold, are also getting a boost from the news.

There were no macroeconomic releases in the EU, and the US will offer some minor readings that will anyway be overshadowed by the Chinese headlines. From being at risk of a steep slide, the short-term picture has turned bullish in the EUR/USD pair, with the price now back above its 20 SMA in the 4 hours chart, still bearish, after bouncing from a bullish 100 SMA. The Momentum indicator re-entered bullish territory, maintaining its upward slope while the RSI indicator has partially lost its upward strength, but heads higher anyway around 58. Additionally, the pair is back above the 23.6% retracement of its latest bullish run, after recovering from near the 50% retracement of the same rally.  

The immediate resistance is the 1.2030 price zone, ahead of a stronger one around 1.2065. Despite the pair has already added 100 pips from its recent lows, and around this last will be near extremely overbought short term, a break above it could see attempting to reach the 1.2100 region, a major long-term static resistance area. Below 1.2000, the next support comes around 1.1950/60, with slides below this last unlikely for the rest of the day.

Support levels: 1.2000 1.1955 1.1920

Resistance levels: 1.2030 1.2065 1.2095

View Live Chart for the EUR/USD


Valeria Bednarik

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