Short

EURUSD: Pullback is coming?

Updated

Hi Traders!
From a technical point of view, the pair is approaching a very important resistance area, it is also our bullish target (see our setup/analysis below). That said, our strategy is very simple: we will be looking for some Reversal Pattern on a smaller time frame (1H), and if this appears, we will try to take a short position, so if you are interested in this pair, continue to follow our updates below or on our website.

PREVIOUS ANALYSIS

EURUSD: Bullish consolidation in short term?

EURUSD: Bullish consolidation? (Part II)

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🔴 Bear Area

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🔴 Well, with our bullish setup reaching Target 2 around 1.1129, we have completed our cycle (see chart below). At the moment the trend on the intraday chart is bullish and we do not see the formation of a Reversal Pattern, but if this happens, a bearish corrective structure could develop an interesting bearish leg, but as long as the pair does not trigger a Reversal Pattern (we are following 30' and 1H chart) the trend remains well supported. In the next update we will show resistance and support areas of the structure in play.
BULLISH SETUP

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🔴 1H Chart Analysis:

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🔴 The European Central Bank's recent rhetoric suggesting interest rates are likely to stay high as inflation remains a problem contrast with hints of rate cuts from the U.S. Federal Reserve and support the euro, Jefferies global head of FX Brad Bechtel says in a note. "Although I think the ECB capitulates, it's hard to get too short EUR/USD until they do." Also supporting the euro, the Red Sea shipping issues that largely affect Chinese-European trade "could provide a mini inflation shock that might keep inflation in the EU elevated beyond current expectations," he says. EUR/USD rises 0.1% to 1.1108, having earlier hit a 5-month high of 1.1142, according to FactSet.

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🔴 The dollar edged higher on Friday but was still set to end 2023 with a loss, reversing two straight years of gains, dragged down by market expectations that the U.S. Federal Reserve could begin easing interest rates as early as March. The greenback crept higher on the last trading day of the year although currency moves were mostly subdued amid a holiday lull leading up to the New Year. Since the Fed launched its aggressive rate-hike cycle in early 2022, expectations of how far U.S. rates would have to rise have been a huge driver of the dollar. But as economic data subsequently pointed to signs that inflation in the United States is cooling, investors turned their focus to how soon the Fed could begin cutting rates - expectations that gathered steam after a dovish tilt at the central bank's December policy meeting.

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🔴 The 2024 trading year kicked off in Asia with bitcoin surging, gold prices climbing and Chinese markets sliding yet again - all of which point to the fact that even in the New Year, the narrative for markets had not changed at all. Trading was thinned in Asian hours with Japan out on a holiday, though expectations that 2024 could mark the start of a global easing cycle remained the dominant market driver, and investors continued to find every reason to latch on to the optimism.
With the data calendar relatively scant for the day, it seems there is little in the way to sway investors betting on a slew of rate cuts beginning early this year, at least until the end of the week when a reading on euro zone inflation and U.S. jobs figures come due. Futures pricing continues to point to a roughly 85% chance the Federal Reserve will start to ease rates in March, according to the CME FedWatch tool.
🔴 Our bearish setup appears to have been correct, meaning that we were not alone in shorting the pair around 1.1129. Having said that, on 1H chart our idea was for some corrective (bearish) structure in the short term like an ABC Pattern shown last week on chart. With this in mind, we cannot rule out further bearish consolidation on intraday chart, but our real driver will be the close of today's session as we published yesterday in our Forex Annual Report 2024. From our point of view, the most important Market Movers for 2024 could be BoJ and FED, and we will not be surprised to see some turbulence in geopolitical events (this will benefit Traders and a little less Investors in 2024).
We wish you a fantastic 2024!

Trade closed: target reached

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🔴 The dollar kicked off the new year with its biggest daily jump since March as traders pared back bets on the scale of the Federal Reserve’s 2024 interest-rate reductions. Such a euphoric start to 2024 comes after a rocky path last year, when the dollar’s performance was largely driven by speculation surrounding when — and by how much — major central banks would cut their key policy rates. The currency fell 2.7% last year, the worst annual performance since the Covid-19 pandemic shocked the world in 2020. While most of 2023’s drop came as Wall Street increased bets on an easing cycle, traders are now reconsidering the monetary path ahead. While central banks have indicated that they’ve likely delivered the final hikes of this cycle, they will also be reluctant to give up the fight against inflation too soon.

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🔴 The U.S. dollar rose to a two-week high on Wednesday, underpinned by elevated U.S. Treasury yields, as investors questioned the market expectation of six interest rate cuts in 2024. Trading was relatively subdued, with Japanese markets shut for a holiday and investors waiting for important U.S. economic releases later in the day, including minutes from the Federal Reserve's December meeting. The dollar, however, came off its highs after data showed the U.S. manufacturing sector contracted further in December although the pace of decline has slowed.
The Institute for Supply Management (ISM) said on Wednesday its manufacturing PMI increased to 47.4 last month after being unchanged at 46.7 for two straight months. It was the 14th consecutive month that the PMI has stayed below 50, which indicates contraction in manufacturing. That is the longest such stretch since the period from August 2000 to January 2002. At the same time, U.S. job openings fell for the third straight month in November. Job openings, a measure of labor demand, dropped 62,000 to 8.790 million on the last day of November, the Labor Department said in its monthly Job Openings and Labor Turnover Survey, or JOLTS report, on Wednesday. A drop in inflation and a dovish tilt in the Federal Reserve's December policy meeting fueled bets for U.S. rate cuts in 2024, undermining the greenback and sparking a rally in Treasuries and stocks in November and December. The dollar index hit a five-month low of 100.61 last week.

TheAnonymousBanker

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