Ahead of the ECB interest rate decision this afternoon it is certainly worth taking a look at the short term technical picture in EUR/USD. A look at the 240 min chart reveals a few interesting patterns. After a thrust up out of a bullish consolidation in a downward sloping channel in mid-October we have seen a so called head and shoulders topping-pattern in the 1.38 area. After the neckline of this pattern was broken to the downside we have seen a plus 300 pip drop last week amid speculation the ECB would lower the benchmark rate again today. Since the low of the move, the pair completed a so called a-b-c correction. This pattern is usually followed by another leg lower, at least to re-test this weeks low in the 1.3440 area but potentially even lower. Only a move above yesterdays high just underneath the 1.3550 level would negate this short term bearish technical outlook. If the ECB indeed lowers the rate this afternoon this scenario could quickly prove to be correct. If they leave rates unchanged we might see a relief rally after last week`s sell-off. A break above 1.3550 would be the trigger for that.
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