Yesterday, all focus was on Mario and he came in and disappointed the Euro bulls. This being the last Euro rate statement of the year, a lot of Euro bulls were expecting bond purchasing to end in March 2017 and tapering of bonds purchase to be mentioned, but instead the ECB and Draghi remained dovish and extended the ECB bond purchasing programs by another 6months to December 2017. The amount of bond purchased was also decreased from 80B Euros to 60B Euros with ECB stating that this was supportive of growth and inflation which has grown modestly over the past year.
To the charts and there is a clear top that has formed on the daily chart. There is an indication of decreasing momentum and reduced volume as a sell signal has been printed by the stochastics while a negative slope is being formed by OBV, meaning there is capital flight to the Yen. Secondly, yesterday’s candlestick ended up forming a clear bearish engulfing double bar reversal pattern occurring at the 121.85 resistance line. Further, if merged, Tuesday’s and Wednesday’s candlestick ended up forming an evening star candlestick formation with Thursday’s candlestick confirming a resumption of bear trend.
Today, look to sell and align yourself with the general trend. The aim here is to sell at any retracement towards the 121.85 resistance line while looking to hold this for a couple of trading days say after the FED announces their rate decision because everything about the Euro is pointing down. For now, there is a consolidation/accumulation happening as price oscillate within a very narrow channel of 70 pips of yesterday’s lows and today’s high after yesterday’s aggressive Euro sale. The 4HR chart is oversold at the moment and I remain patience till price reaches the 121.85 zone that is when I will see the reaction and initiate a short as below.
So, my trade plan will be as follows:
Sell Limit: 121.80
Stop Loss: 122.20
Take Profit: Hold till Fed rate decision. If stop loss is hit, re-enter with an oversold stochastics in the 1HR chart.
Have a good trading day and a nice weekend.