Michael Kopanakis Head of brokerage at SquaredDirect
Michael Kopanakis Head of brokerage at SquaredDirect

‘Technicals’ struggling to keep Euro steady amidst high volatility and uncertainty.

October was a bad month for the Euro as it continued to lose ground against most of the other major currencies with limited exceptions like CHF and JPY.

October was a bad month for the Euro as it continued to lose ground against most of the other major currencies with limited exceptions like CHF and JPY.

The ECB kept the interest rate unchanged and will also end the QE program in December. It also confirmed that the first rate-hike won’t be seen earlier than summer of 2019. Europe forced Italy to revise its 2019 budget for the first time in history as debt per GDP reached 130%.

All these factors, plus tensions between USA and China, plus the upcoming Brexit, are keeping the market volatile. I believe that EUR/ USD is maybe the most important benchmark when measuring the growth and power of the European economy.

Of course, in order to measure these variables, you always need to have them compared to variables of other economies; in our specific case the economy of the US. The sentiment in Europe has slightly changed, as we saw the rate dive down to 1.13.

On the other hand, if we take a closer look at the daily chart, we can see that EUR/ USD is trading in range from the 16th of May until today 7th of November with upper boundary at 1.1825 and lower boundary at 1.13.

We can see a Double Bottom formation ready to be confirmed but we do need a break above 1.1475 to consider the formation valid. It seems that the Bulls are trying hard to take control and gain momentum again so they can drive the rate to higher levels. A clear break above the psychological level of 1.15 will be a good indication of a bullish momentum.

To sum it all up, the Euro from a technical point of view has been trading in range for the last six months (1.1825-1.13), so taking into consideration reversal formations like Double Bottom, the price might try to test the upper boundary of the mentioned range on the upcoming months.

If price breaks below 1.13, it will be very hard for Europe to recover as Bears would have managed to break below a very significant support level (1.13) which has also been confirmed by one of the most valid technical formations (Double Bottom). A break below will open the road for 1.11.