In this past week, the US Dollar Index has broken the support, marked by the white diagonal line, in the above chart. The red arrow points at the break which was predicted by me in last week’s blog. In that blog, I was looking for depreciation in the Dollar which occurred when President Donald Trump gave his first public speech on Wednesday 4th January. In my weekly vlog, I talked about the support area marked by the horizontal yellow line which is an important price level for a possible bounce or support. The support marked by the yellow line could mean that the price will range as it did in the last 2 weeks of November 2016.
If the price bounces on the support area, one of the patterns that I will be paying attention to is the famous Head & Shoulder reversal pattern. This type of pattern will be confirmed if the US Dollar were to start appreciating again and only if it broke the neckline once it started to sell. If the Head and Shoulder pattern is confirmed next week or in a couple of weeks’ time, I will mark the neckline so that everyone knows when it is safe to enter a sell position. On Wednesday we will also have some leading indicator news such as the CPI and the speech from Fed Chair Yellen and then on Thursday, analysists and traders will be expecting the unemployment claims data.
In my weekly blog last week, I wrote about the end of a 5 Elliott Wave Theory as the market started to form an Inverted Head and Shoulder pattern which indicates a reverse in the EURUSD. Last week’s trade idea was to buy Euro as I was seeing a weaker US Dollar. As you can see from the above image, the price managed to break above resistance. I have introduced a possible neckline marked by the yellow horizontal line.
On Tuesday and Wednesday, the World Economic Forum (WEF) will meet which means that we may see some volatility when the central bankers speak. On Thursday the European Central Bank will decide on the interest rate which is expected to be left unchanged and it will follow with a press conference held by the ECB president Mario Draghi. One of the many things economists and traders want to know is whether there are any changes in monetary policy.
Trade idea: This week for me will be about waiting for the EURUSD to break the resistance at 1.0700. After the break, I will be waiting for a pullback to then start to buy Euro. First potential target is at 1.0740/50 price area. If the price breaks, I would want to hold the trade up to the potential neckline at 1.0800 price level. We will be looking for an entry in the London Live Trading Room.
Written by Elkana Roveglia – www.Takemytrades.com