EUR/USD: quick big picture analysis

Since April 2008 EUR/USD has been in a serious downtrend. However, the currency pair seem to have hit a bottom at around 1.03995. This level has been tested in March 2015, December 2015 and most recently in December 2015. Since then the EUR has steadily gained against USD and has recently breached a .236 fibonacci level seen on the weekly chart. Now the question is does the currency pair continue its upward trend or is this a false breakout?

Fed vs. ECB

The fundamentals tend to show a mixed picture with the Fed on the course of raising rates however lack of inflation has caused the Fed to step back on its hawkish comments, suggesting that the market may have overshot its rate hike expectations. On the other hand, job growth remains steady and the unemployment rate is continually declining in the U.S.

On the EUR side of the equation, the ECB has been slower on the trigger to taper its QE program. However, there has been some recent speculation that the ECB will also begin to announce tapering, catching up with the Federal Reserve's interest rate trajectory. This has partially contributed to the appreciation of EUR against USD.

Chances of bearish reversal

On the other hand, there is still a possibility of a reversal. The RSI indicator is showing an oversold signal while the MACD and Slow Stochastic are also beginning to look more bearish or at least showing down on the bullish side. Also, the latest weekly candle for the currency pair looks quite indecisive, possibly signaling a turnaround.

However, the .236 fibonacci level at 1.16846 could provide significant support. This level also acted as resistance in August 2015 and May 2016.

Watch for Trump stimulus implementation

Traders should watch for whether President Trump is able to implement his financial stimulus and infrastructure plans while facing major political problems in the U.S. and even a possible impeachment. Many analysts have been saying that the market has gotten ahead of itself in optimism for Trump's infrastructure plan to provide much needed fiscal stimulus to the American economy. Bets on Trump's successful implementation of his fiscal stimulus plans would be bullish for the dollar, according to an article in the Financial Times.

If you are looking to make some profits in the currency markets but just do not have the time or ability to watch and analyze the market, then you may want to consider following our trade signal which can be found HERE. Start following our trade signal and start making profits now!

Looking for a reliable Forex broker?  Try AVA Trade for the most reliable transactions!