EURUSD
EURUSD scored modest gains in yesterday’s trading as a handful of low-tier data from the US disappointed forecasts. The currency pair opened at 1.1111 and traded to an intraday high of 1.1143. In the New York session, EURUSD slid to 1.1106 before settling at 1.1120.
All reports from the US came in worse than expected yesterday. The Philly Fed Manufacturing index for December printed much lower at 0.3 versus the 8.1 forecast. This suggests that businesses in the industry may not feel so confident about the current economic conditions. Meanwhile, unemployment claims report for last week showed that there were more people who applied for unemployment benefits at 234,000 than the 225,000 forecast. Existing home sales for November also failed to meet expectations. The report printed at 5.35 million versus the 5.44 million consensus.
Individually, these reports do not often significantly affect the US dollar. However, it was probably a combination of all reports missing forecasts and waning excitement over the US-China phase one deal that weakened the US dollar.
Of course, it may not have also helped that US President Donald Trump was voted to be impeached by congress yesterday. The next step is for the articles of impeachment to move into Senate. While there seems to be a consensus that Trump will not actually get kicked out of office, it still poses the risk of political uncertainty.
Given all the dollar’s woes, it would seem that market participants were quick to ignore the research released by the ECB staff yesterday. According to the report, the central bank can still drive rates into the deeper negative territory before they become counter-productive. Take note that this was a paper produced by the central bank staff and does not necessarily reflect the opinion of policymakers.
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On the 1-hour chart, we can see that EURUSD seems to have formed a descending triangle. This becomes apparent when you connect the lower highs from December 12, December 17, and December 19. Meanwhile, the lows of December 12, December 18, and December 19 form the bottom of the triangle. This is often interpreted as a bearish signal in forex trading because EURUSD’s lower highs suggest that there may not be enough buyers to push prices higher. A close below support around 1.1110 could mean that sellers may soon push the currency pair to its December 6 lows around 1.1050.
On the other hand, a close above yesterday’s high at 1.1143 will invalidate the chart pattern. It could suggest that EURUSD may soon rally to 1.1173 or 1.1197 where it made highs this and last week.