Last week we saw an increase of 0.03% in the CPI m/m and a 0.01% in the Core CPI m/m which signals a stronger US economy and an increase in inflation which ultimately will put some pressure on the Federal Reserve to increase interest rates so as to control inflation. This coming Wednesday 22nd February, the FED will publish the FOMC meeting minutes in which most analysts will look for hawkish words.
Knowing that a possible procrastinated hike may occur in March, technical analysis shows a Head and Shoulder pattern which implies a corrective move is ahead. I have marked this pattern with the blue colour and also placed a question mark as a pattern is ALWAYS confirmed once it breaks out, continuing in the direction that the Big Boys have communicated.
This week I will still expect more upside in the US Dollar Index so as to retest the 102.00/102.50 price levels. If those price levels act as a resistance, my confidence in the Head and Shoulder reversal pattern will increase. If then, an interest rate hike happens in March, it will confirm the reversal pattern that I showed in my previous vlog where I explained that interest rates hikes produce a weaker Dollar so as to control inflation.
This week, from the front of the Fundamental news, there is no important data expected from the Eurozone, however, the news that can and will effect the Euro will come from the USA. As the EURUSD is preparing to finish what appears to be an Inverted Head and Shoulder, (I am saying ‘appears’ as it will only be confirmed once the price breaks out of the pattern and in the direction the pattern was communicating) I see for this week a depreciation in the Euro vs the US Dollar.
Trade idea: Two sell opportunities I see in this currency pair.
1. A sell up to the 1.0500 price area and a rejection to see the Euro starting appreciating again OR
2. Still a sell but down to the 1.0440 price area which corresponds to the 270 extension Fibonacci level. This level I see more probable for target and rejection.
Written by Elkana Roveglia – www.TakeMyTrades.com