EURUSD Intraday Strategy: Looking Forward to the ECB

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EURUSD Intraday Strategy

The European Central Bank (ECB) meeting is due on Thursday (22 October, 2015) where Mario Draghi will reveal the central bank’s policy. Remarks from ECB Nowotny suggested more structural tools are required as the central bank may miss its inflation target, sending the Euro lower against a basket of currencies.

The main concern for expanding the Quantitative Easing (QE) on Thursday are the Spanish elections that are due at the end of December. Following the Greek attempt to renegotiate its debt deal with the EU, the support for anti-austerity in Spain soared significantly.  Although Alexis Tsipras resignation dented the support for the Spanish anti-austerity parties the ECB may not wish to exhaust its resources should the outcome of the Spanish elections will trigger a risk-aversion mode in global markets.

EURUSD 4hr Chart

Please click on the chart to enlarge:

EURUSD 4hr Chart 17/10/15

EURUSD 4hr Chart 17/10/15

EURUSD painted top Head-And-Shoulders (H&S) on the 4hr chart, suggesting weakness may be seen upon a successful break below the neckline (1.1340). We suspect this technical pattern may lead many technical forex traders astray as the Euro may remain supported throughout the week. The optimal scenario would be a successful re-test of 1.1316 that may contain EURUSD weakness and force corrective gains in the market. We cannot rule out at the time of this writing that 1.1340 (H&S neckline) will be violated by the market and may very well act as a firm support level.

EURUSD intraday strategy is also suited for breakout strategies. A firm break below 1.1316 may trigger further selling in Euro Dollar, targeting the 200 Moving Average (MA, in blue) where a break below the 200MA may expose 1.1215. A successful re-test of the 200MA may be used for dip-buying strategies.

If the price breaks above 1.1400 we would expect the gains to be sustained in the market as many stops are layered above the resistance (1.1400). Upon a successful breach the stops are likely to be taken out by the market and accelerate EURUSD corrective gains. The target upon a successful breakout is 1.1510 as we are also bearing the ECB monetary policy in mind. We should also highlight that large stops are noted around 1.5000.

23/10/15 UPDATE: The rebound off 1.1316 provided a brief rally in EURUSD although we expecting a stronger correction.

Please click on the chart to enlarge:

EURUSD 4hr Chart 23/10/15

EURUSD 4hr Chart 23/10/15

As Mario Draghi hinted lower deposit rate was discussed in the ECB monetary policy meeting heavy losses were seen across EUR pairs and crosses.

EURUSD Intraday Strategy: Looking Forward to the ECB

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EURUSD Intraday Strategy: Looking Forward to the ECB

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EURUSD Intraday Strategy: Looking Forward to the ECB

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EURUSD Intraday Strategy: Looking Forward to the ECB

Last Updated on October 25, 2015