After breaking through the key long-term resistance level of 1.1015 (200 EMA on the weekly chart) at the end of last week, EUR/USD continues to rise towards the local high of 1.1090 today, also testing the important long-term resistance level of 1.1040 (50 EMA on the monthly chart).
Technical indicators OsMA, RSI, and Stochastic on daily and weekly charts are on the buyers' side.
But is everything so clear? What if the dollar continues to roll down just out of inertia? And what if we are witnessing another bubble in the American stock market? Maybe we should take Federal Reserve Chairman Jerome Powell's statements seriously that the market is overestimating the possibility of a quick start to the Fed's tight monetary policy. According to him, markets are ahead of events, too optimistically perceiving the Fed's decisions and forecasts regarding further plans for the interest rate.
In this case, some strong news factor may be sufficient, for example, news of a new armed conflict in some regions of the world, especially if U.S. interests are involved. It is also worth paying attention to the economic calendar of the first trading week of 2024, when fresh data on business activity in the manufacturing and services sectors (ISM PMIs) of the U.S. economy will be presented, December data from the U.S. labor market, which, along with data on inflation and GDP dynamics, are of key importance to the Fed in planning credit and monetary policy, as well as preliminary consumer inflation indices for Germany and the Eurozone for December (see Economic Calendar).
It also often happens that new strong trends emerge in the first days of the new year.
In this case, the first signal to resume short positions on EUR/USD will be the breakdown of the support level of 1.1040, and confirming (after a decline to the zone below the support levels of 1.1015, 1.1000) will be the breakdown of the important short-term support level of 1.0967 (200 EMA on the 1-hour chart).
The breakdown of the key support level of 1.0770 (200 EMA on the daily chart, 50 EMA on the weekly chart) and the local support level of 1.0725 will confirm the return of EUR/USD to the long-term downward trend, the beginning of which can be attributed to June 2021. Targets for decline in case of realizing this scenario are the local support levels 1.0530 and 1.0450, and then the marks of 1.0400 and 1.0300, near which the lower boundary of the downward channel on the weekly chart passes.
Alternatively, after breaking through the local resistance level of 1.1090, the rise of EUR/USD will continue towards the local high of July 2023 at 1.1275. The signal for implementing this scenario may be the breakout of today's high at 1.1060.
Support levels: 1.1040, 1.1015, 1.1000, 1.0967, 1.0910, 1.0900, 1.0870, 1.0840, 1.0800, 1.0770, 1.0725, 1.0700, 1.0660, 1.0600, 1.0530, 1.0500, 1.0450, 1.0400, 1.0300
Resistance levels: 1.1060, 1.1090, 1.1100, 1.1200, 1.1275, 1.1300, 1.1400, 1.1500, 1.1530
Trading Scenarios
Main Scenario: Buy Stop 1.1070. Stop-Loss 1.1010. Targets 1.1090, 1.1100, 1.1200, 1.1275, 1.1300, 1.1400, 1.1500, 1.1530
Alternative Scenario: Sell Stop 1.1010. Stop-Loss 1.1070. Targets 1.1000, 1.0967, 1.0910, 1.0900, 1.0870, 1.0840, 1.0800, 1.0770, 1.0725, 1.0700, 1.0660, 1.0600, 1.0530, 1.0500, 1.0450, 1.0400, 1.0300
"Targets" correspond to support/resistance levels. This also does not mean that they will necessarily be reached, but they can serve as a guideline for planning and placing your trading positions.