Euro bulls are having trouble to stay above 250 and I don’t expect them to break up towards 300 early next week either, even though they could always surprise me. I expect them to reach 500, but I think its safer to wait for a re-test of parity first or for a clean break above 250. So for me the week will start in waiting mode. If we start with a downmove…I will wait for when it stops, if at the 100 level again or if it breaks below, towards parity or lower. We have big events by the end of the week, BoE monetary meeting on thursday and big US news on friday. Until then the market will get into positions…so the safest bet is to wait until then, so you don’t get trapped into a bad trade early.
EU was hovering around 1.0200 for most of this week. Bulls were failing above 250 and bears were failing below 150, so the range was pretty tight and great for scalpers. That will most likely change next week as we have a FED meeting on wednesday and a 75 bps hike is expected. That is pretty much already priced in. What wasn’t priced in was the ECB hike this week…where the market expected a 25 bps hike and ECB surprised with a 50 bps one! BUT euro bulls were so tired by that time, they couldn’t manage to stay above 250. The daily chart is a problem for the bulls, and the H4 chart looks “overbought”, too. So I wouldn’t be surprised if we broke below 150 next week…and re-tested parity before or during FED. If that happened, the parity area might give us another good opportunity to go long. Because even though FED will most likely hike by 75 bps…imagine what would happen if they only did a 50 bps hike. And it can easily happen, with the current bad economic numbers. But its a FED week…the best and safest way to make money is to stay away from trading until wednesday. And by then the chart will be clear and it will be an easier choice if to go long or short on euro, because right now at 200, we can go 150-200 pips up and down and both moves would make sense.
Something really did break this week, but it wasn’t the dollar, it was the euro. And below 340, which was a barrier for more than 2 decades, there was no support for bulls. It was a one-way street until friday, when London did a final bearish dump, only to find some buyers below 100. I wouldn’t sell this at these levels…first I would like to see a re-test of the longterm support at 340, or even 340-400. If the market can go up there and fails to hold above, bears should take over again and re-test the lows. If that area breaks to the upside and keeps holding as support again, 550-600 will be my bullish target. The bullish divergence on daily chart, along with the buyers below 100, give EU some hope for a bullish run next week. We have no big events planned, but the week after that is ECB and the week after that is FED. So next week should be more technical, without any more shocks, hopefully.
The current range on all pairs is getting annoying. Looking at the USD chart, something will need to happen soon…either bulls break upwards or bears take it down, finally. As you can see, bulls are not having much luck staying above 105. The same goes for EU, where bears have a hard time staying below 400 and for GU, where 2000 acts as a tough support, where price keeps bouncing from. So what now? Looks like we will have to wait for the week to unfold. Its really hard to make a prediction based on the current price action and chart setup. If I had to choose, I would say USD will go down…BUT…we are dangerously close to important support on both EU and GU. We had another bounce from there today, it was the first day of the month, last day of the week and the bounce started before London fix…that should mean something. But next week will need to confirm this…so watch out for next week’s weekly candle.
I just found some old prediction of mine from early 2020 and thought it will be interresting to compare with today’s chart. I didn’t hold this trade for 2 years, obviously, as I am not really a swing trader, for many reasons, but its fun to check, nonetheless.
This week we had a surprising FED meeting, with a rate hike bigger than expected. But thats not the surprising part…the surprising part is that the bankers and media, who leaked the information on monday, were actually right. Like it wasn’t enough the market has been acting crazy for the past few months, now we even have media and banks that aren’t lying? These are very weird and confusing times…I mean banks lying to us and giving false statements, was one of the things we could count on…and now this happens. But ok, now on a serious note. We might have seen a historic week…with the last push of the dollar bulls. On wednesday, Euro was super weak…it was hovering around 380 just 1-2 hours before the meeting, where FED was supposed to hike by 50 bps only. Euro was very near its long term support of 340…if that broke, hell would break loose. Now, if you are thinking just fundamentally, without knowing the market…you would think that a FED hike by 50 bps alone would be enough to take an already weak Euro down to 340, which was only 40 pips away shortly before the meeting and break it. And then FED came with a 75 bps hike! And YET, not only didn’t Euro break that level, it actually started going up. Which, for a trader who thinks both technically and fundamentally, made perfect sense. Long story short, all this hiking into 3-4% by FED is already priced in. Dollar bulls are already tired…they can’t go up until forever…you don’t make any profit until you close a winning trade…and once enough people close their trades, market turns around. And thats exactly what happened. And we might have seen what will come next, on thursday, when EU moved 220 pips up! Friday is mostly profit taking day and I didn’t expect bulls to make further progress, as the move on thursday was massive and they got tired by the end. But London fix on friday might have given us a clue that Dollar weakness is only starting. Those dollar bulls from the past few months will want to cash out eventually…and thats when Dollar might re-visit 101-102 on the USDx chart and possibly lower. Might be wrong, of course. 😉
My EURO and POUND targets for next week are shown on the charts below. We have FED on wednesday and BOE on thursday, but the first targets should be reached easily before then. Beyond that I don’t want to speculate, lets see where the price will be before FED on wednesday.
ECB meeting will be held on Thursday, June 9, next week! Right now, EU is hovering around 1.07…and can easily go either way, 300 pips up or 300 pips down, to strong demand and supply zones. It might be best to stay out until Thursday, when the situation becomes more clear.
This below is my theory into next week. But its just a theory…
This week, euro was bullish, as expected and I have to say…finally! But looking at the PA from thursday and friday, bulls got tired between 700-750 and might need some resting time next week. I am not expecting bears to take back full control and break below 340, but the range play might be downwards below 700. I have honestly no idea how deep it can go…but the first important news data next week is on friday and by then it should be all clear, even before the numbers are released. Tuesday is the last day of the month, so it will be important to watch where the month ends. If you look at the daily chart, even though EU seems still very bullish on smaller timeframes, it is on “top of the range” on daily. Thats why I think bulls will take a break, recover a little and start a new bull run from lower levels. In theory, a double bottom at 350 wouldn’t surprise me either, but lets take it step by step. For now…at 730…I am not buying…just waiting for better long entries and scalp shorting below 750. We also have a bearish shark on GU H4 and USDCHF is also very “oversold”, so all these things combined could mean that USD might gain some next week.
So after a long struggle, EU turned bullish this week, as I predicted last week. And the bull run ended at 580-630, like expected, since that was the last FED resistance. This will be an important barrier to focus on next week. Right now bulls seem to be gaining strength to be able to break above…looking at H4, there is a lot of potencial for a strong bull move. The question is if we see a downmove first, when the week starts…we are now at 560…and I wouldn’t be surprised if we re-tested 500 or even lower. Even a fake break of 350 is still not out of question, but it doesn’t seem likely now. I am just saying, that even if we did start with a strong bearish move, for whatever reason, I would remain bullish…so the deeper we go, the better entries for the bulls into 850-950 as a first big target, after breaking above 630. If you look at the longterm USD chart, bulls are again weakening at the current strong supply zone…and when they give up, there should be a big drop of 500-1000 pips. So in my opinion, its better to collect longs at these levels than shorts…because fundamentally, everything that could go wrong, already went wrong…even the situation in Ukraine is not much of news anymore…the market seems to be focusing more on ECB talking about hiking for the first time in more than 10 years.