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.
For the past 2 weeks EU was bouncing off the 1.05 zone and it looked like bulls will be able to defend it. Because even if pound was dropping, euro was still defending the 1.05 area, everytime it went a little under, hawkish talk from the ECB made it spike above 550. Until thursday, when bulls gave up early in the London session and once the area broke, they were showing no more power…like they gave up. Here is the thing…340 is a very strong support for the euro, a multiyear support, if it broke, there might be a small flash crash below, but I don’t think it would be long-lasting. If you look at EG, it also broke a multiyear support not so long ago, many people thought its just a start for the bears, but to the contrary, EG started a bull trend since then. Anyway, 340 didn’t break yet…we had a stop loss hunt on friday, breaking the previous low just by a few pips and quickly reversing to the upside, ending the day above 400. Looking at other dollar pairs, EU is showing bottoming patters on smaller time-frames, GU the same, but also AUD and NZD…very strong bottoming patterns on H1. I mean…if this doesn’t bring USD down, I don’t know what will. As for bullish targets for the EU, we have a small top at 630, which was created during the FED meeting. So being long from 350-400, I would be cautious around 580-630, to see how the area reacts. If the resistance breaks, then 850-950 would be likely next. But lets take it little by little…asian session started to buy the EU recently, so lets see if they start the week by doing so.
This week was first working out nicely, according to last week’s pattern.
We reached a strong resistance of 920 and bulls didn’t manage to stay above. Its the same level from a previous ECB meeting, so it won’t break easily, it seems. But after that, EU calmed down between 830-850 and was preparing for another attempt to break the high…BUT then friday happened and a crazy move on the pound messed up the plans for EU, too. For whatever reason GU overreacted to the retail sales data, which wasn’t even so bad and turned into a bloody friday, with a 200 pip drop, without any sign of bulls along the way. EU and GU are highly correlated, but EU was doing a good job resisting the drop. So since GU dropped 200 pips, the fact that EU only closed 35 pips below thursday’s closing price, was a big win for the bulls. GU should move towards 3000 next week and unless Le Pen wins french presidency on Sunday, EU should again make an attempt to break the resistance at 920. And I think they will do it this time…like they say, third time’s the charm. Right now Macron has a comfortable lead over Le Pen in the polls…the only thing that might cause trouble for him is a low turnout. If Macron wins, EURO should turn bullish for the time being.