It had to do something
The North American session started with a EURUSD range of 17 pips. The heart was barely beating. The market had to do something (or die), so the price has extended higher own. Why? Because sellers gave up or yields are lower or stocks tilted a little lower, or maybe the US/China is not that bad, and that is good for the EU too? Find a reason, but it could have been just because it needed a heartbeat for the pair and the upside was as good a way as any.
Recall yesterday, Draghi reiterated the idea that things are not that great in the EU, but he also had eternal hope (despite the weaker PMI data yesterday). He said things like:
- Growth momentum has slowed more than we had previously anticipated (bearish)
- Slowdown is mainly due to weakness in international trade in an environment of persistent uncertainties (blaming)
- Underlying inflation remains muted (bearish)
- Recent data and forward-looking indicators do not show convincing signs of a rebound in growth in the near future (bearish)
- The longer manufacturing weakness extends, the higher the chances of a spillover (bearish)
- ECB is ready to use all instruments (bullish)
Yesterday, the EURUSD dipped in the NY session but not to the earlier PMI double lows at the 1.09656 level (the NY low reached 1.0979).
Today, the price dipped to 1.0983 which was just below the swing low from September 11 (holds a support level) and the price chopped below the swing high from yesterday at 1.1000 level (nice round number), and that 1.0983 level below until the extension higher in the early NY trading.
What now?
Well the underside of the broken trendline from yesterday comes in at 1.1016. Around that area are some swing levels at the 1.10135 to 1.10159 area. That area should attract sellers on a test, if the price can continue the upside momentum from here..
In a tight market, the 1.1000 is the tight support level. It was resistance yesterday and resistance today until broken. So why not have it as close support today. A move below, could shift sentiment back lower.
Looking at the daily chart below, the price lows for the month tried to break below a lower trend lne and each failed. A double bottom formed. That is bullish. However, the correction higher stalled right at the swing lows from April, May and July a few weeks back. Since then the price has moved lower but not to the lower levels from earlier in the month. The price yesterday and today did stay below the 1.10265 swing low from August 1. More bearish.
The daily chart shows the bearish chop we are in (bias more to the downside with some caution).
