Morning technical analysis – 6 February 2014 | Alpari Newsroom …
Morning technical analysis – 6 February 2014
February 6, 2014
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EURUSD
The euro is trading relatively flat against the dollar ahead of the key ECB decision this afternoon. This has actually been the case over the last couple of days leaving the pair in a consolidation phase and unlikely to break out before the rate decision and press conference. This leaves us in an undesirable position whereby the ECB is likely to dictate the next move in this pair. That said, I am still bearish for a couple of reasons. The first is technical, with the pair having broken below the ascending trend line, following a relatively sharp sell-off, before testing this as a new level of resistance yesterday. This effectively acted as confirmation of the break. The consolidation that followed is typically a bearish continuation pattern. What this all tells us is that, while the pair is currently consolidating ahead of the ECB decision, there is a clear bearish bias in the market. This reflects expectations that the ECB will ease monetary policy or at the very least release a very dovish statement. This is the second reason why I am bearish. It’s very unlikely that the ECB will do nothing and show no desire to change their stance in the coming months, which means the likely impact on the euro will be bearish. If we do see a break below the flag formation, the initial target will be Monday’s lows of 1.3476, followed by 1.3458, the 38.2 fib level, 1.3378, the 200-day SMA, and 1.3324, the 50 fib level.
GBPUSD
Sterling found strong support around 1.6260, 50% retracement of the move from 12 November lows to 24 January highs, again yesterday, but failed to gain any upward momentum. Clearly there’s significant support around this level, which has also previously been a key level of support and resistance. However, the lack of buyers coming in is a bit of a red flag for sterling bulls. One reason for this could be today’s BoE announcement. No change in interest rates or asset purchases is expected, but there is a chance we could get a statement in relation to forward guidance, which could potentially be negative for sterling. That may explain the reluctance of sterling bulls so we may have to wait until this afternoon for another push higher. If we do see a push higher, then some key levels of resistance should be 1.6340, resistance over the last couple of days, 1.6410, 50-day SMA, 1.6440, 50 and 200-period SMAs on the 4-hour chart and 1.6465, ascending trend line that the pair broke below on Monday. Alternatively, a move lower should see the pair find support 1.6484, descending trend line that the pair broke above on 27 November, followed by 1.6464, 61.8% retracement of the above move. A break of these levels would be extremely bearish for the pair, opening up a move to previous lows of 1.5850.
USDJPY
There’s also a lot of indecision in the dollar yen pair today, with the pair trading in a very tight range. The pair is looking a little more bullish having pared most of its losses yesterday following quite a negative start to the day. The rally later in the session pushed the pair through the first descending trend line on the 4-hour chart, the first indication the the recent downtrend may have bottomed out. If we see a break above the second trend line, this would further suggest that the pair is looking more bullish. This would also be consistent with what we’re seeing on the daily chart, with the pair having failed to close below the Ichimoku cloud, which suggests the longer term uptrend is still in tact. The fact that this support came roughly in line with the 50 fib level further supports this. Further confirmation of the more bullish bias will come if the pair breaks above its recent highs of 101.75, which has previously been a key level of support.
Author: Craig Erlam
Tagged EUR/USD, Fibonacci, foreign exchange trading, forex, forex uk, FX, GBP/USD, Ichimoku Kinko Hyo, Metatrader 4, Moving Averages, MT4, MT5, Technical analysis, USD/JPY
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Morning technical analysis – 6 February 2014 | Alpari Newsroom …
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