EURUSD since second half of May moved in a consolidation as a form of time correction against previous increases. As a result of demand response and rejection of the lower limit of this box in the 1.1125 area, from Tuesday, June 20 we see increases but realy dynamic tendency occurred yesterday.
All guilty Mario Draghi?
Mario Draghi, President of the European Central Bank (ECB), said yesterday that “European Central Bank would have to gradually adjust its monetary policy to the prevailing economic conditions”. These words were received by investors as a sign of future rate hikes in the Euro area.
As a result of these increases, market has broke out from above mentioned consolidation, which is consistent with the theory that box is a form of correction, usually followed by a continuation of the earlier trend.
According to the polarization principle in near future we would expect to re-test area around this support which currently coincides with the 38.2% Fibonacci correction. It is hard to say with any certainty whether any drops will occur now or not, but if there is such retest in this area, we might expect high demand response. Its emergence and rejection of this zone could be a signal for a rebound and hence an opportunity to open long positions consistent with a general upward trend.