On Tuesday the 6th of February, trading on the euro/dollar pair closed slightly up. The euro dropped to 1.2315 before recovering to 1.2404 ( 89). Turmoil on the US stock market subsided to help euro bulls recover their losses. At the end of the day, the indices closed between 1.7% and 2.3% up.
Day’s news (GMT 3):
- 10:00 Germany: industrial production (Dec).
- 11:00 Switzerland: foreign currency reserves (Dec).
- 18:30 USA: EIA crude oil stocks change.
- 23:00 New Zealand: RBNZ interest rate decision.
Fig 1. EURUSD hourly chart. Source: TradingView
My expectations of a drop to the 135th degree came off perfectly. Now we turn our attention towards today’s session.
In my intraday forecast for the week running from the 5th to the 9th of February, I’ve got a phase of growth starting on Thursday. Since the low on this model has been reached, today we should see a reversal form.
Still, we shouldn’t rule out the possibility of returning to 1.2340. With reversals, we can often see rather deep corrections. Moreover, the dollar is getting an extra boost from the growth in US 10Y bond yields.
Meanwhile, the fact that the political parties in Germany still haven’t managed to form a government is weighing down on the euro. Talks were supposed to come to an end on Monday, but didn’t. The parties are struggling to find a compromise.
In my forecast, I’m expecting a drop to 1.2365. The 45th degree is sitting at 1.2348. Since we have a mixed picture on the euro crosses, I’m allowing for the possibility of a drop to here. Buyers left a long tail on the daily candlestick. Since the session high was reached before the low, my forecast is predicting a breakout of the trend line, followed by a jump to 1.2426.
I’m not entertaining the idea of the euro going any higher than the 90th degree today given that the phase of growth isn’t supposed to start until Thursday.