In my last week currency forecast, I was expecting some retracement before continuing to see a further depreciation in the US Dollar Index. As you can see from the chart above, the US Dollar continued to sell instead, whilst the 99.50 price level was acting again as support. This week we are expecting CB Consumer Confidence on Tuesday and then on Thursday, the final GDP q/q & Unemployment Claim. If the data is positive we could see a bounce in the Dollar.
When I look at the technical analysis, I can see that a probable bounce is due, partly because of the support and partly because they left some unretraced candles behind (a candle(s) left unretraced means that there are big investors still in a trade and in the wrong direction – hence why 97% of the time a retracement has to occur, as it gives those investors to square up their books and take off their trades).
As you can see from the chart, I have drawn with green arrows a two possible bouncing point before seeing some appreciation in the US Dollar. The first arrow (from the left) shows the bounce occurring before the break of the neckline; whilst the dashed arrow shows the possible break of the neckline with a price bounce at previous support (marked by the yellow line) and then some appreciation to the 101.00 price area.
Looking at the EURUSD (chart above), it shows the same scenario as the US Dollar Index but inverted. I have marked with three black arrows the resistance and neckline of the Inverted Head & Shoulder. A possible retracement or accumulation (sideways move) is probable. I personally would like to see some retracement before seeing the EURUSD continue its appreciation.
If instead data from the US comes out strong, a retracement in the Euro is more probable which gives us, in any case, a better entry. If instead, the price ends up breaking the marked resistance and neckline, it will signal to all technical analysts and traders that we are continuing the up-move.
Trade idea: A retracement will give me a better entry opportunity to continue buying Euro vs US Dollar. If instead, we see the break of resistance, I would want to wait for a retracement back to the current resistance and start buying Euro. It could well be that this week we might end up sitting in our hands before getting involved.