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EUR/USD Monthly Technical Analysis for November 2015

By:
James Hyerczyk
Updated: Nov 1, 2015, 16:25 UTC

The EUR/USD sold off in October, weakened by the strong possibility of fresh stimulus from the European Central Bank as early as December and a possible

Monthly EUR/USD

The EUR/USD sold off in October, weakened by the strong possibility of fresh stimulus from the European Central Bank as early as December and a possible interest rate hike by the U.S. Federal Reserve before the end of the year. The Forex pair closed at 1.002, down 0.0174, or 1.56%.

European Central Bank President Mario Draghi delivered the decisive blows that crashed the Euro against the British Pound with his comments about extending and expanding QE while surprising investors with talk of a rate cut and a “vigilant” hint of imminent action. 

Comments that helped break the single-currency included, “It was not a wait-and-see, but it was a work-and-assess”. He also said, “We are ready to act if needed, we are open to a whole menu of monetary policy instruments.” Finally, he added, “The degree of monetary policy accommodation will need to be re-examined at our December policy meeting when the new…projections will be available, referring to quarterly growth and inflation forecasts issued by ECB staff economists. 

I interpreted Draghi’s comments to mean that if QE isn’t working then do more. This is basically the same steps that other central banks have taken. If the Euro Zone economy doesn’t improve in the next month then look for a major Christmas present from the ECB in the form of an interest rate cut, an expansion of the ECB’s 1.1 trillion bond-buying program and an extension of the purchases beyond September 2016. 

In October, the Fed kept its benchmark interest rate unchanged as expected, but it also surprised investors by making a direct reference to its next meeting in its statement. The statement was perceived by investors as “hawkish” because it opened the door for a possible rate hike before the end of the year.

“In determining whether it will be appropriate to raise the target range at its next meeting, the committee will assess progress – both realized and expected – toward its objectives of maximum employment and 2 percent inflation,” it said.

The Fed also dropped a warning on global economic slowdown, a step which some believe, brings the central bank closer to a rate hike. The hawkish Fed statement raised the probability of a rate hike in December to 50 percent, up from 30 percent before the statement, according to the Fed Funds futures contract.

Monthly EUR/USD
Monthly EUR/USD

Technically, the main trend is down according to the monthly swing chart.

The short-term range is 1.0462 to 1.1712. Its 50% level or pivot price is 1.1087. This level is controlling the short-term direction of the market.

Based on the close at 1.1002, the key area to watch is the pivot at 1.1087, a short-term uptrending angle at 1.1102 and a long-term downtrending angle at 1.1113.

Look for a bearish tone as long as the EUR/USD remains under 1.1087. A bullish tone will develop on  a sustained move over 1.1113.

If the selling pressure persists then look for a test of the first downside target at 1.0542. The last potential support angle before the 1.0462 main bottom comes in at 

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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