EUR/USD: Correction To 1.1800 In The Works

Previous:

On Monday the 23rd of October, trading on the euro/dollar pair closed down. The rate dropped to 1.1725 during trading in Chicago. The euro fell on the back of a rising dollar and the Catalonian crisis.

The main driver for the dollar was the optimism surrounding tax reform in the US as well as Donald Trump’s announcement that he will soon nominate a candidate to head the Federal Reserve.

Day’s news (GMT+3):

Fig 1. EURUSD rate on the hourly. Source: TradingView

My predictions for yesterday came off in full. Sellers’ last visit to 1.1725 was one too many as now a bullish divergence has formed between the price and the AO. This is a buy signal for the euro and who knows from which level renewed sales will start.

There’s some more noise on the hourly timeframe, where traders are awaiting the results of the ECB meeting and Mario Draghi’s press conference (Thursday), as well as further developments from Madrid and Catalonia. Carles Puigdemont is set to speak in the Catalonian parliament today and offer a response to Madrid.

Since the hourly stochastic oscillator is up, my forecast has the euro dropping against the dollar to 1.1745 followed by a jump to 1.1880.

On the crosses, the euro is trading up against the dollar, franc, yen, Aussie, and Kiwi. This means that buyers have some pretty good support from them, who will most likely continue to buy during declines based on indicators on larger timeframes (4H, 6H, 8H). On the chart above, the stochastic is signaling the euro to rise for the rest of the trading session. The lower the price falls from Europe’s open, the lower the target will be for the US session.