Article originally published on innerfx.com and republished here with permission
The safest way to double your money is to fold it over and put it in your pocket. ~ Kin Hubbard
Good morning. Euro holds onto gains fairly well and managed to recover after dropping to as low as $1.2953 yesterday, which turned out to be a corrective move. Dollar continues to push on support around 79.50 which should provide clues of further weakness towards 77 if breached, eventually. Today’s economic schedule is quite busy and there are some key events such as: German Ifo, Draghi’s Speech, Fed Interest Rate Decision and FOMC Statement
So we’re looking at a rather classic pattern of resistance becoming pivotal support, being tested several times. While it holds, we can say that the downward movement is corrective but this is the 3rd day now and there’s no strong reversal candle to be seen around these levels, and that pops up a big warning sign suggesting that the decline ain’t over yet.
As most short-term and intraday charts suggest these days, euro’s recovery is quite strong mainly due to mass short-covering and the positive correlation to more risk-sensitive instruments such as AUD.
On the daily chart below we can see that a resistance layer formed by recent highs of December’s second half is about to be tested as price is approaching 1.3050. This is a potential breakout scenario to consider, until potential signs of a resuming decline will become obvious. For now I remain bullish on EURUSD (short-term) but not because of EUR but because of other/stronger instruments which I’m expecting to continue appreciating.
Silver holds onto strength consolidating below 32.50-33 interim resistance, which I believe to be the next breakout zone to keep an eye on.
Yesterday’s decline to 80.75 was indeed corrective, as mentioned in my report. The entire rally is very strong and basically this is one of the instruments EUR is following.
Next upside target is best seen on the daily chart, and it’s around 83.
Although EUR pulled back yesterday and .8375/00 holds, it’s still a good idea to watch this level as a breakout is likely.
And so we’re back to yesterday’s opening levels as support at 1.29 holds. Potential breakdown is still in the cards while AUD holds below 1.30.
Hourly chart looks rather scary: AUD recovered all daily losses in one hour