FX Analysis and Technical Outlook
James Chen, CMT January 22, 2016 12:30 PM
EUR/USD fell late in the week after a dovish ECB press conference, and could have significantly more room to fall on a sustained breakdown below key 1.0800 support. Technical bias: Bearish.
USD/JPY hit a one-year low at 116.00 on global market volatility but rebounded above 118.00 late in the week as markets stabilized. Technical bias: Neutral to Moderately Bearish.
GBP/USD made an oversold bounce after hitting a new multi-year low, but continues to trade within a sharp bearish trend. Technical bias: Moderately Bearish.
USD/CAD has pulled back sharply after having over-extended its uptrend to extreme highs, but the bullish trend currently remains intact. Technical bias: Moderately Bullish.
EUR/USD spent the past week continuing its recent consolidation above the 1.0800 support level. On Thursday, however, the euro resumed a more bearish stance after European Central Bank (ECB) President Mario Draghi held a press conference during which he made some rather dovish comments, hinting that the ECB may adopt a more aggressive easing stance going forward. Draghi stressed that the ECB would be ready and willing to act, if warranted, by implementing the many tools at its disposal. This brought EUR/USD back down to hit the noted 1.0800 support. With an increasingly dovish ECB set in stark contrast to a potential Federal Reserve monetary tightening cycle, the longer-term bias for EUR/USD continues to be bearish in line with the well-established long-term downtrend for the currency pair. With any sustained re-break below 1.0800, the next major target remains at the major 1.0500 support level, last re-approached in early December. Further to the downside, any confirmed continuation of the downtrend momentum should then begin to target the 1.0200 support level.
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