Euro Pressured by Strength in Yen and Swissy, Dollar Supported by ISM

Euro is the main victim in the price actions in early US session. On the one hand, after consolidating for more than a day, Yen and Swiss Franc strengthens again in early US session, in particular, with EUR/JPY and EUR/CHF crosses breaking prior lows. While USD/JPY’s fall also resumed by dipping further to 116 level, USD/CHF is still kept above prior low of 1.2142. Dollar is being supported by stronger than expected ISM manufacturing index and core PCE and recovers against Euro and Swissy.

US ISM manufacturing index surpassed consensus expectations and rebounded strongly from 49.3 to 52.3 in Feb, which is the highest reading since last Sep. The sub indices are also strong with production and employment rebounded back to above 50. Meanwhile, price paid index surged strongly to 59.0. Personal income rose 1.0% in Jan, well above expectations, but possibly with inclusion of bonus payments. Spending rose 0.5%. The core PCE deflator was up 0.3% mom, 2.3% yoy, the fastest increase since last Aug. The data showed economy in the US is still healthy and with inflation staying above Fed’s comfort zone, Fed should still maintain its tightening bias and keep rates on hold through the year.


Daily Pivots: (S1) 1.3191; (P) 1.3216; (R1) 1.3253;


EUR/USD’s fall rom 1.3258 resumes in early US session and dips to as low as 1.3167 so far. At discussed before, a short term top is formed at 1.3258 and hence further correction is still in favor as long as EUR/USD stays below 1.3237 minor resistance. However, recent rally should still be in force as long as downside of the current retreat is contained by 1.3149 support. Break of 1.3237 resistance will suggest that such rally has resumed with a retest of 1.3258 high first, and then 1.3296 resistance.

However, with bearish divergence conditions in 4 hours MACD and RSI, break of 1.3149 will indicate the whole rise from 1.2911 has possibly completed with five waves up to 1.3258 and should pull back to 1.3078 support or below.

In the bigger picture, the corrective fall from 1.3364 has completed with three waves down to 1.2865. With EUR/USD staying within medium term rising channel (lower channel line at 1.2828 now), medium term up trend from 1.1639 is still in progress. Current rally is being treated as resumption of this up trend. Break of 1.3296 resistance will add more credence to this view and should push EUR/USD to a new high above 1.3364. However, a drop below 1.2939 will dampen this view and indicate the correction from 1.3364 is likely still in progress instead.

However, with bearish divergence condition in weekly MACD and RSI, a medium term top could be around the corner. Upside of this medium term rally could be limited by resistance zone of 1.3668 (04 high) and 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. But clear reversal pattern or a break of the lower channel line is needed to indicate a medium term top is formed, otherwise, further rise is still in favor.

EUR/USD 4 Hours Chart - Forex Education, Forex Course, Forex Tutorial, Forex eBooks, Forex Training

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Shing-Ip Tsui is the founder and CEO of ActionForex is set up with the aim to empower individual forex traders by providing insightful contents. Analysis reports, live pivot points on majors and crosses, etc are provided with collection of carefully selected educational articles and free trading ebook downloads.