November was about consolidating, in an up and down range.The bottom of the range came at the 1.2357-60 area (lows for the month).In December, the pre-ECB decision, took the price below that level on Wednesday last week. The ECB less dovish stance pushed the price back above, then the stellar employment report on Friday sent the pair back lower and below this floor. Surely, it was adios to the consolidation area.
Say it ain’t so? Are we going to head back in the consolidation area from November?
On my last EURUSD post on Friday, I discussed the bearish fundamental/technical picture (see: Forex Technical Update: The action slows in the EURUSD but the bearish bias does not change. I tend to do it each Friday but I cannot help it). I said:
What might derail a further fall in the EURUSD? Fed officials who downplay the report perhaps. A technical short covering rally. Weak data that does not support the job picture.
Well, SF Fed’s Williams and Atlanta Fed’s Lockhart both came out today talking about the “lift-off” still being mid 2015. Lockhart added that he is comfortable with continuing the “considerable time” language. The officials seemed to say and think:
“NFP 321k? “That don’t impress me much”
Thanks for the inspiration Shania Twain. Behind Shania Twain in my ranking of favorite Canadians is Adam Button. No offense Adam.
Add to the the Fed’s ambivalence, is some short covering (the low today got within 3-4 pips of the next trend line target at 1.2243. When the price could not go below, the shorts started to cover – see chart below)
EURUSD got close to the next target at the 1.2243. Shorts started to cover, helped by Fed comments.
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What now? The price moved above the 100 hour MA (blue line) in the chart above at the 1.2331 in the last hourly bar, but is trading back below it currently. Seller take a deep breathe. The key area that continues to tell my story is the 1.2357-60 area. On Friday, I wrote:
Looking at the hourly chart, I can go back to the 1.2357 and 1.2360 lows from November and ask “Is there a reason to go above this level now that it is broken for the 2nd time this week – this time on a much stronger fundamental piece of data”? and the answer would be “No”.
So there it is.
Now, the winds can change. The officials did say the Fed is still data dependent. I assume that means both ways (i.e. on weaker and stronger data). The ECB can also change their tune. So eyes and ears will be on the US Retail Sales, on the ECB monthly bulletin, the EU industrial production, German CPI and what any official says. But what will be eyed most closely is the 1.2357-60 area. I don’t believe the upside.is the way to go, but if the price goes above, the medium term tech pictures changes with that breach.
