The EUR/USD's Best Day of 2017 was Corrective, Not a Game-Changer
Traders who trade the news would have been bewildered by the rise of the Euro on Thursday.
The gains saw the Euro to Dollar exchange rate rise from 1.0598 to 1.0674, delivering the Euro’s best day against the Dollar of 2017.
By rights, the Euro should have been the currency which weakened not the Dollar, after the publication of rather disappointing information contained in the minutes of the European Central Bank (ECB) meeting earlier in February.
Those minutes showed absolutely no intention from the governing council to reduce its stimulus programme, thus scotching hopes of a taper.
If anything, the Dollar should have gained after Vice President of the Federal Reserve Stanley Fischer came out and said that the path of inflation and employment was up and alluded to increasing interest rates, not two but three times in 2017.
However, the Dollar actually weakened, leaving questions unanswered as to what was really driving markets. (We have a good piece here that offers some explanations as to why the USD is underperforming).
Market technicians may not have been quite as surprised at the Dollar’s comedown and the Euro’s recovery as the EUR/USD chart was already looking a little overstretched to the downside after four straight days of declines.
However, the chart signs were not exactly obvious either.
One technician, Lloyds Strategist Robin Wilkins remains bearish EUR/USD despite Thursday’s big up day as it still has not broken above a key watershed level which would flip the trend higher.
“We are coming into near-term resistance between 1.0675 and 1.0710, with intra-day studies moving to “over-bought” levels. As such we see the upside limited to this region for a slide back towards 1.06,” said Wilkins.
That Thursday’s surge is part of a corrective process rather than a trend-changer is also the opinion of Commerzbank’s Karen Jones.
“EUR/USD near-term outlook – strong rebound should start to struggle at the 20-day MA: EUR/USD did not sustain the break down from the base of the cloud (Ichimoku) at 1.0563 and bounced strongly from 1.0521. This has delayed our negative bias as it allows for a corrective move into the 1.0660/1.0700 band. Once complete our focus will return to recent lows at 1.0352/40.”
Thursday, February 16 (circled) was the Euro's best day in 2017 and a strong up-day for the EUR/USD currency pair.
