EURUSD: Head And Shoulders Model May Not Work Out

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On Wednesday the 1st of November, trading on the euro/dollar pair closed down at 1.1618. The 45th degree at 1.1607 prevented the euro from falling any further. Sellers were unable to break this level even after some strong US data and the conclusion of the FOMC’s meeting.

The Fed’s November meeting passed over us rather peacefully as there was no publication of economic projections, nor was there a press conference with Fed Chair Janet Yellen.

The key rate was maintained at 1 – 1.25%. This decision was in line with expectations, so the reaction was muted. Market participants are expecting a rate hike at the next meeting in December.

Day’s news (GMT+3):

09:45 Switzerland: SECO consumer climate (Q3). This news is just for show and can be ignored.

11:15 Switzerland: real retail sales (Sep).

11:50 France: Markit manufacturing PMI (Oct).

11:55 Germany: Markit manufacturing PMI (Oct), unemployment rate (Oct), unemployment change (Oct).

12:00 Eurozone: Markit manufacturing PMI (Oct).

12:30 UK: PMI construction (Oct).

15:00 UK: BoE interest rate decision, BoE asset purchase facility, monetary policy summary, BoE quarterly inflation report.

15:30 UK: BoE’s governor Carney speech.

15:30 USA: initial jobless claims (27 Oct).

19:20 USA: Fed’s William Dudley speech.

Fig 1. EURUSD rate on the hourly.

Source: TradingView

On Wednesday, trading on the euro closed down, although the price didn’t reach the target in my forecast (1.1580). The euro stopped falling at around the 45th degree. Sellers got some excellent momentum from 1.1657 and broke through 1.1625, which they had been chipping away at for 40 hours, before finally coming to a stop. A series of constant 30-pip price jumps significantly weakened their position. They were unable to nurture the new bearish impulse despite the strong ADP data and the positive conclusion to the Fed meeting.

Today in Asia, the rate has jumped 59 pips. The reasons for such a rapid increase are beyond me. All I know is that this morning’s growth to above 1.1600 has cast doubt on the continuation of the head and shoulders (H&S) model. If Thursday’s candlestick closes above 1.1600, we can forget about the H&S model.