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EURUSD - Eases from Two Year High above 1.21 as ECB Set to Increase Stimulus



EURUSD - Eases from Two Year High above 1.21 as ECB Set to Increase Stimulus
In the last few days, the EURUSD has eased from a two year high around 1.2170 back to around 1.2050. In the week prior it had surged higher to the high after breaking through the key 1.19 level which had been applying significant resistance to the currency pair. Any recent attempts to move through this level have been rejected swiftly so it is significant that the EURUSD has been able to maintain the break and continue higher. Several weeks ago, the EURUSD surged higher from below the other current key level of 1.17, before running into the resistance at 1.19.

Throughout October, the EURUSD rested on support at the 1.17 level as it reinforced itself as a key level, continuing to prop up the EURUSD and keep it within the range between it and the other key level at 1.19. The EURUSD has spent the best part of the last three months trading between these two key levels with the 1.19 level providing stiff resistance, and if it was to fall back below 1.19 again, you would expect the 1.17 level to provide support again.

Back in August the EURUSD made another run and reached a two year high above 1.19, however it reversed strongly after meeting solid selling pressure. The 1.19 level has established itself as a key level as it had been resisting prices for the last three months as the EURUSD had been consolidating after its strong move through July. In the few weeks in July leading up to the highs around 1.19, the EURUSD surged higher strongly after meeting some resistance at 1.13 for several weeks, as it was trading between support at 1.12 and the resistance at 1.13 consolidating there for several weeks. This consolidation occurred after easing from a then three month high above 1.14.

Given the significance of the 1.13 level, this is likely to offer some support should the EURUSD decline from its current highs. A sign of strength would be for the EURUSD to continue to consolidate under the key 1.19 level and then potentially push higher again. On its way to the then three month high above 1.14, the EURUSD moved through many key levels on its way, many of which have previously played a role in the EURUSD’s price action, including the 1.10 level which had been offering stiff resistance on several occasions throughout April and May.

The European Central Bank (ECB) is poised to expand its already massive stimulus program as the region tackles a significant second wave of the coronavirus and consequent strict government lockdowns.In its recent meeting the ECB said it would respond to the “unfolding situation” and then infections started to grow significantly which then adversely impacted any economic forecasts for the Euro Zone.The central bank has resisted any urge to comment on the likelihood of vaccine success.Analysts are expecting the ECB to extend their bond-buying program until December 2021, with an extra 600 billion euros in total, with a new financing program for banks.The Bank of International Settlements has warned in its quarterly report of the risk of rising insolvencies, and Europe is prone as much as any region for a further surge in bankruptcies.

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The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.

This post was written by Graeme Watkins

CEO Valutrades Limited, Graeme Watkins is an FX and CFD market veteran with more than 10 years experience. Key roles include management, senior systems and controls, sales, project management and operations. Graeme has help significant roles for both brokerages and technology platforms.