EURUSD Slumps on ECB Rate Meeting, Could Reach 1.0922 on H&S Pattern

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Written By: Alejandro Zambrano

Jan 23, 2020, 15:40 GMT 15:40

EURGBP

Summary:

With two hours left of the European session, the EURUSD is trying to take out the Dec 20 low of 1.1065. On a break to the low, the price could reach 1.0922.

With two hours left of the European trading session, the EURUSD is trying to take out the December 20 low of 1.1065. If the EURUSD pair manages to close below the low, then a large head and shoulders pattern with a price target of 1.0922 would have been triggered. And, even if the pattern is not triggered, the short-term trend will remain downwards below the January 21 high of 1.1118.

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The move lower was triggered by the ECB rate meeting, where the central bank continues to target two percent inflation. To do so they have implemented monthly assets purchases of 20 billion Euros, however, annual inflation is just at 1.3%. Following the 2008/2009 recession, the inflation rate has rarely been above the two percent mark, and given the poor economic growth in the Euro area, it is unlikely that inflation will rise anytime soon. Similar monetary experiments in Japan over the last decades have not archived higher inflation. Traders appear to have understood this, and sent the Euro lower.

The next EURUSD support level is the November 14 low of 1.0987, followed by the head and shoulders target at 1.0922.

Written By: Alejandro Zambrano

Alejandro Zambrano combines extensive professional experience and a pragmatic attitude to trading, building clients’ understanding of the markets and the rationale behind investing. Zambrano was the Chief Market Strategist of the FCA regulated broker, Amana Capital. Prior to that, he was also the Head Analyst at FXCM’s London research desk. Interact with Alex via Twitter at @AlexFX00.