Just two sentences of the President of the United States was enough to weaken the American currency significantly yesterday evening.
“I think the dollar is becoming too strong. This is partly my fault because people believe in me. However, this is not a good situation. There are several pros of the strongest currency, but the biggest one – let’s be honest – is that the ‘strong currency’ just sounds nice” – he said in an interview.
Donald Trump also expressed his sympathy for low interest rates. Clearly he still hasn’t opinion about the current president of the Fed, Janet Yellen. “I like her, I respect her. But it is too early to judge “- Trump was supposed to say to journalists.
Let’s take a look at the EUR/USD reaction and how it changes the technical outlook. The situation on a five-minute chart during the Wednesday session is shown on the first chart. The price eventually overcame a significant resistance at 1.0650, testing it from the top:
Interval H1 shows us that today dollar bulls are trying to make up the loss, which so far is done with succes. The price returns to S/R 1.0650 and 23.6% of the Fibonacci abolition measured after the March and April declines:
What we are most interested in is the broad context on the daily chart. Since mid-December we have seen weak dynamic correction of falls from the second half of 2016. Attempts on the demand side usually end at 1.0800, while the bears tend to stop in the confluence support at 1.0580 (trend line, horizontal level and 23.6% Fibonacci).
So we are moving in a tapered technical system from which the price will eventually have to break out. Looking for medium-term tendencies, much more favorable and more likely seems to be moving south. Overcoming overlapping supports will open the way for February-March minimas around 1.0490 and then multi-year lows from 2016/2017 (1.0340).
Chart W1 makes us realize that breaking 1.0580 does not have to be easy. The level was tested twice in 2015, giving rise 800 and 1000 pips.
