EUR/USD Consolidates After Strong US Data
Dollar was pressured most of the day by Euro and sterling but rebound strongly in US session after strong US economic data.
Conference Board Consumer Confidence rose much more than expected to 109.0 in Dec, beating expectation of 102. This was the strongest reading since April which was at 109.8. Chicago PMI rebounded from prior sub-50 reading of 49.9 and rose 2.5 pts to 52.4, also above consensus of 50.5. After yesterday’s stronger than expected new homes sales data, existing home sales also surprised the market by rising 0.6% to 6.28M annualized rate.
After the volatility, Euro and Sterling are still bounded in consolidation against dollar. On the other hand, the Japanese yen continues to weaken, in particular against Euro, with new record high of 156.69 scored in EUR/JPY.
EUR/USD
Daily Pivots: (S1) 1.3080; (P) 1.3128; (R1) 1.3162;
More
With the rebound from 1.3103 limited below mentioned 1.3211 resistance, outlook remains unchanged. Consolidation that started from 1.3362/64 will still likely continue. A dip below 1.3103 support will push for a retest of 1.3051 low. Break will encourage further fall towards 1.2923/38 cluster support (50% retracement of 1.2483 to 1.3362 at 1.2923, 100% projection of 1.3362 to 1.3051 from 1.3244 at 1.2933).
However, since we’re treating the current fall as correction to whole rise from 1.2483 only, downside of this correction should be contained by 1.2923/38 cluster support and bring further rally to retest 1.3668 key resistance (04 high).
On the upside, above 1.3211 resistance will indicate the corrective fall from 1.3362/64 has completed and should bring retest of this high. But firm break above this level is needed to confirm resumption of rally from 1.2483. Otherwise, consolidation could still extend further.
In the bigger picture, medium term outlook remains bullish as long as EUR/USD stays above 1.2760 support or before clear formation of reversal pattern. The current medium term up trend from 1.1639 could either be resumption of multi-year up trend from 0.8223 or just part of a larger scale consolidation that started at 1.3668. But neither case is confirmed yet. On the upside, 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822 will be key to confirm the former case. On the downside, break of 1.2760 support will turn medium term outlook neutral and argue that whole medium term rally from 1.1639 has possibly completed. Focus will be shifted by to 1.2483 key support and break will confirm this case and bring much deeper decline.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
Shing-Ip Tsui is the founder and CEO of
www.ActionForex.com. 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.