Thursday, October 20, 2016

EUR/USD Reached an Important Support Level and It May Rebound from It before Breaking below It

The ECB interest rate was announced today and it remained unchanged, but it was Mario Draghi’s press-conference that caused a lot of volatility on the market. There was a powerful spike to the upside and then a sharp drop, which led the pair to the important support level at 1.09102 (the thick blue line).

It is possible for the pair to temporarily stop its move to the downside and rebound, especially considering the powerful 117 pip daily bar that has formed so far, which is normal during high impact events.

The two price channels on the weekly time frame are what drew my attention, however. The pair has reached the limit of neither one of them, and it may or may not reach them in the future, or it may even fall below those levels. All three scenarios are possible.

In case the pair does reach them it would fall to 0.9645 – 0.9650, which is considerably below parity.