On Wednesday the 15th of November, trading on the euro/dollar pair closed down to form a pin bar or shooting start model on the daily timeframe. The euro opened up in the European session. In the space of three hours, the rate jumped 68 pips to 1.1853. After the publication of US data, buyers shifted the intraday high to 1.1860.
Traders initially reacted by selling the dollar after the publication revealed slowing inflation in the US in October. However, annual inflation and retail sales data turned out better than expected. After a sharp reversal upwards for US 10Y bond yields, traders started taking profit on their positions on the euro/dollar.
Fuel was added to the fire by Eric Rosengren, head of the Boston Fed. Rosengren contended that due to the fact that the US economy is growing faster, the Fed should continue on its path of rate hikes for the rest of the year and into next year. By the end of the day, the rate had dropped to 1.1790, erasing all of its gains.
Day’s news (GMT 3):
- 11:45 Eurozone: ECB board member Yves Mersch’s speech.
- 12:30 UK: retail sales (Oct).
- 13:00 Eurozone: CPI (Oct).
- 16:30 Canada: Canadian portfolio investment in foreign securities (Sep), foreign portfolio investment in Canadian securities (Sep), manufacturing shipments (Sep).
- 16:30 USA: initial jobless claims (10 Nov), import price index (Oct), Philadelphia Fed manufacturing survey (Nov).
- 17:00 UK: BoE governor Mark Carney’s speech, MPC member Cunliffe’s speech, MPC member Broadbent’s speech.
- 17:10 USA: FOMC member Mester’s speech.
- 17:15 USA: industrial production (Oct), capacity utilisation (Oct).
- 18:00 USA: NAHB housing market index (Nov).
- 20:00 Switzerland: SNB governing board member Andréa Maechler’s speech, SNB governing board member Dewet Moser’s speech.
- 20:30 USA: FOMC member Kaplan’s speech.
Fig 1. EURUSD rate on the hourly. Source: TradingView
The U3 MA line held buyers up once again. The resistance around the 1.1850 mark was bolstered by the horizontal Gann line. In the second half of the day, some buyers exited the market, while some turned into bears.
The price returned from the U3 line (SMA 55, 1% divergence) to the LB balance line. The market is now in equilibrium on the hourly timeframe. The price is sitting on the 67th degree. Considering that a pin bar has formed on the daily timeframe, I’m forecasting a drop to 1.1751 with an intermediate rebound to 1.1803. This drop won’t happen, though, if the hourly candlestick closes above 1.1805. If the euro opens down in Europe, we can set a target at 1.1724 (112th degree). I’d also recommend keeping an eye on price behaviour after the long-tailed candlesticks formed on 29/08, 08/09, and 22/09.
The target for the pin bar is 1.1710, but there’s no guarantee that this will be reached. However, it has more than a 60% chance of working out. These things tend to work out well when there aren’t any important news releases planned. There are a lot of speeches scheduled for today and no one knows who will say what.