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FX analysis

Charts of the day – a potential bottom reversal in play of EUR/USD (medium-term trend)


Adding to Kelvin Wong’s short term FX Technical Strategy (21 Apr 2011), some fundamental factors were being navigated from the overnight US session, where the US 10-year Treasury yields slumped from a 3-year high after some major banks indicated to turn back to bonds purchase, while the Japanese Yen strengthened against the US dollar from a 20-year low as the Japanese deputy remarked concerns of the currency stability. Coincidentally, major central banks’ leaders, including ECB President Christine Lagarde, and Fed Chair Jerome Powell, will speak at the IMF-World Bank meeting later today. It is expected that Powell would lock the expectation for a 50-basis points rate hike in his speech, which markets have already priced in. Laggard will likely raise concerns about inflation and probably be considered more hawkish on the monetary policy.

Therefore, a potential establishment of a medium-term bottom reversal for EUR/USD may be in play.

EUR/USD- Daily (A potential bottom reversal in play, with a bullish divergence standing out)

(Click to see the enlarged chart)

Key technical elements:

  • A morning star followed by a bullish candlestick indicates the downtrend may be bottoming out.
  • Multiple oscillators, including MACD, ISR, and Stochastic are all forming potential bullish divergence with the price movement, where the price is in the downtrend, but oscillators are on their uptrends.
  • Stochastic formed a golden cross in the oversold territory, suggesting bearish momentum is fading.

Key price levels:

Supports: 1.0720, 1.0754, 1.0770

Resistances: 1.0850, 1.0870, 1.0912, 1.11

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