EURUSD Declines but Divergence Emerges, Caution on Short Covering【April 17, 2024】

Fundamental Analysis

• The Fed Chair expresses caution on rate cuts, stating more time is needed
• The ECB President comments that rate cuts will be implemented soon unless there are surprises
• USDJPY approaches 155, while EURUSD continues its downward trend

EURUSD technical analysis

Analyzing the daily chart of EURUSD. EURUSD has broken below the recent low of 1.07 USD and has entered a downtrend according to Dow theory. It has since fallen to the early 1.06 USD levels.

Attention is drawn to the moving averages, where the 28-day moving average is about to cross below the 200-day moving average, indicating an imminent death cross. The completion of this death cross will be key to watch.

Fundamentally, the Fed Chair has shown a cautious stance on rate cuts. Initially, 5-6 rate cuts were anticipated this year, but now the market is probing whether two cuts are feasible given the positive US economic indicators, suggesting an environment not conducive to rate cuts.

The ECB President stated that “rate cuts are forthcoming unless there are surprises,” clarifying the rate cut trajectory.

Thus, an expansion in the interest rate differential is expected to drive EUR lower and USD higher. The long-term expectation is for EURUSD to continue falling.

Day trading strategy (1 hour)

Analyzing the 1-hour EURUSD chart. In the short term, the MACD shows a divergence, suggesting a near-term adjustment. The momentum of the decline appears to be weakening.

The 1.0580 USD level is a significant support line, and a rebound is expected. Additionally, market sentiment indicates that 90% are holding short positions, confirming a skewed positioning.

The expected scenario is a sharp fall to 1.0580 USD, followed by short covering, targeting the stop losses of 90% of short positions.

The day trading approach would be to go contrarian. Entry policy would be a buy limit at 1.0580 USD, with a take profit at 1.065 USD and a stop at 1.0550 USD.

Support/Resistance lines

Important support and resistance lines to consider moving forward include:

1.0581 USD – a major monthly support line

Market Sentiment

EURUSD Sell: 10% Buy: 90%

Featured Currency Pair of the Week (AUDJPY)

AUDJPY is showing unstable movements. As the forex market is primarily driven by USD, movements in USDJPY and AUDUSD are opposite. This influence causes AUDJPY to swing significantly, making it a challenging market.

Looking at the daily chart, the 28-day moving average is being tested. The focus will be on whether it rebounds. The long-term trend of JPY depreciation is expected to continue, suggesting that swing trading to pick up dips might be favorable.

Today’s important economic indicators

*Trading advice in this article is not provided by Milton Markets, but by Shu Fujiyasu Jr., a certified technical analyst.