Bulls on USD are surely surprised about what happened during last few days. On Tuesday and Wednesday we could trace Yellen speech which was clearly hawkish. Really surprising was a dollar strength after Tuesday when Yellen did not tell anything we had no idea about before. Completely different reaction we saw yesterday.
“We should expect short term rates gain” – Janet Yellen said yesterday in Congress. Despite that investors instead of buying dollar decided to book their profits.
After Tuesday’s speech of Yellen EURUSD broke strongly through support at 1.06 and created low 80 pips lower. After that there was deeper correction. More hawkish Yellen become about next rates hike, more pips USD lost to euro.
In the end the pair broke bearish trend line, came back above 1.06 and started further appreciation. Asian session was not very volatile but gains reached area of 1.0640. There is 39.2% retracement of bearish movement which started in the beginning of February.
Bulls clearly have a problem with breaking this area, bears surely are helped by the fact of stopping price there few times already. Despite that the setup of averages and price action points on higher probability of further gains. Where to?
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First stop can be resistance area next to 1.07. This area was tested in the past and additionally there is another important Fibonacci retracement – 61.8. Looking at daily chart we can see reversed H&S being created. If it will show up on the chart, then going back above 1.08 is just a matter of time.
