Head And Shoulders Still Intact
The head and shoulders chart pattern we pointed out earlier this week is still intact. In fact, EURUSD broke below support at the neckline and has already retested it for resistance. When you enrol to our forex trading course, you will learn that a neckline-break is considered as the confirmation for further sell-off.
However, it is important to keep in mind that today’s highly-anticipated ECB rate statement could make EURUSD more volatile today. At 12:45 pm GMT, the central bank is not expected to announce any changes to its interest rate which is currently at 0.00%. ECB President Christine Lagarde is also anticipated to announced that the bank’s asset purchase program will be kept steady. Remember that in September 2019, the ECB announced its QE program at 20 billion EUR per month.
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Will Lagarde Provide EURUSD with Support?
As Eno Eteng reported earlier this week, more than the bank’s monetary policy, market participants are looking forward to Lagarde’s language regarding inflation. If she changes the ECB’s forward guidance to imply that inflation is seen to be at 2% or higher, the market could view that as a hawkish statement. It could then be bullish for the euro.
If this turns out to be the case, you can expect for the confluence of resistance around 1.1120 to be tested. This price coincides with the 200 SMA as well as the neckline of the head and shoulders pattern. Additionally, it coincides with the falling trend line from connecting the highs of December 31 and January 16. If resistance does not hold, we may even see the pair rally to its January 6 highs around 1.1200.
On the other hand, if the central bank’s inflation target remains at “below but close to 2%” we could see EURUSD weaken. A drop below today’s low at 1.1069 may mean that the currency pair is headed to its November 27 lows at 1.0990.
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