The euro is third only to the yen and Swiss franc in terms of performance against the US dollar today. EURUSD is trading 0.71% higher after the FOMC slashed rates in an emergency meeting over the weekend. As of this writing, the currency pair is at 1.1093. Its technicals also suggest that there is still room to trade higher.
Ahead of its initial schedule which was supposed to be on Thursday, Fed Reserve Chairman Powell announced that rates would be at 0.00% yesterday. Along with this, the central bank will also be launching a $700 billion QE program in an effort to support the economy amid the coronavirus pandemic. This follows as the US now ranks 8th in terms of the most number of confirmed coronavirus cases at 3,774.
This news drew enough bids to EURUSD. Remember that unlike the Fed, the ECB did not cut rates in its last meeting. The narrowing interest-rate differential between the two central banks may help explain the uptick on the currency pair.
A closer look at the 1-hour chart suggests that buyers could be priming to push EURUSD higher. The currency pair has formed a double bottom chart pattern. In forex trading, this is considered as a bullish reversal chart pattern. It is characterized by a market getting rejected at a support level twice. For EURUSD, this price is 1.1060.
Before the currency can significantly rally, buyers will need to close above the confluence of resistance around 1.1220. For one, this price coincides with the neckline of the double bottom. Secondly, the area seems to align with resistance from the falling trend line (when you connect the highs of March 9 and March 12. If buyers can successfully sustain the rally on EURUSD beyond this resistance level, the next ceiling could be at 1.1325 where the currency pair topped on March 12.
On the other hand, reversal candlesticks around the neck line and trend line could mean that sellers are still in control. We may soon see EURUSD revisit last week’s lows at 1.1055.More content