What’s inside:

  • EURUSD breaks out of bull-flag, registers new 2017 high on Yellen, Draghi speeches
  • Big long-term levels lie not far ahead, could soon prove problematic
  • US Dollar Index now deeper into major long-term support

Looking for a longer-term view on EURUSD? Check out the Q3 Forecast.

Last week, up until Yellen and Draghi spoke at the economic symposium in Jackson Hole, EURUSD did what we expected – continue to chop within the confines of a building bull-flag. The chop created a narrowing range (triangle) heading into Friday, from which Yellen’s words sprung the euro free from. It was an outcome we discussed in the webinar leading up to Friday’s developments.

The resulting move from Yellen’s words took the euro up near the recent 11910 high, Draghi finished off the breakout (albeit by only a few pips on a closing basis), with the euro moving to its best levels since early January 2015. The breakout brings the next level of resistance into play by way of the 2012 low at 12041. Beyond there we will look towards the upper parallel tied to the trend-line off the April swing-low, and with a big surge the June 2010 monthly close at 12236. To flip the script, it would require the Friday rally to be fully negated.

EURUSD: Daily

EURUSD - Jackson Hole Breakout Brings Big Picture Levels into Focus

As we discussed last week regarding the US Dollar Index (DXY), prior to Friday’s move it was trading at the upper portion of a long-term support zone, one which is now being thoroughly tested; the lower end of the zone is ~91.40 There is little love for the dollar as most market participants, as evidenced by the year-to-date decline, continue to be sellers. When a trend becomes extremely lop-sided into support it is worth paying attention to as reversals can quickly arise. With that said, we haven’t yet seen price action to back this notion up of course; but should we see the DXY turn (euro to drive this move, as it is ~57% of the index) we’ll be ready for a counter-move to unfold, and perhaps swiftly so…

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US Dollar Index (DXY): Monthly

EURUSD - Jackson Hole Breakout Brings Big Picture Levels into Focus

---Written by Paul Robinson, Market Analyst

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