EURUSD since 2008 moves south. As a result of breaking in January 2015 support zones around the 1.1800 level for more than two years we have seen a consolidation which lower limit coincides with 70.7% Fibonacci correction from earlier gains and the upper Fibonacci retracement of 38.2% from the last downtrend move.
Looking at weekly chart, we note that market in December/January tested and rejected lower limit of current consolidation and since than moved slowly north. As a result of these increases pair reached upper limit of consolidation, where we could expect some supply response.
On daily chart we note that market since December last year moved in a growth channel. After breaking the top, a re-test and rejection of the upper limit of formation followed. After Mario Draghi’s speech on Tuesday wrongly read by markets that the European Central Bank would have to gradually adjust its monetary policy to the prevailing conditions we observed a strong appreciation of the European currency. These words were received by investors as a sign of future rate hikes in the Euro area.
Yesterday representatives of the European Central Bank, however, stated that this statement was wrongly received. Despite the dynamic response to this comment, the depreciation of the Euro was only temporary and the market quickly returned to growth.
So if in upper area of consolidation to which we are currently approaching a supply response will occur and this level will be rejected, we would expect at least a downward correction, as a result of which market could reach area of recently defeated resistance converging with a 50% Fibo correction
