Chart of the Day: EUR/USD

Chart of the Day: Spot EUR/USD (30/06/2020) |

The ECB said on Thursday it was increasing the overall size of its Pandemic Emergency Purchase Programme (PEPP) by 500 billion euros to 1.85 trillion euros. It extended the scheme by nine months to March 2022. Whilst on Friday, ECB policymaker Francois Villeroy de Galhau said the European Central Bank is targeting favourable financing conditions rather than pump a given amount of liquidity into the economy with its latest stimulus decision.

The ECB was keeping a close eye on the exchange rate with the euro trading at its highest level since April 2018. They do not have an exchange rate target ... but have a strong vigilance about the effects of the exchange rate on inflation and are ready as a result of this vigilance to use all our instruments,"
The EURUSD having approached levels not seen since April 2018, might be poised for either consolidation before either moving higher or lower. With the ECB keeping a keen eye on exchange rate, that may suggest that there is the potential for the Euro to move lower. The Euro was in a consolidation from 21/01/2018 - 15/04/2020 when it moved above 1.21687. Although it reached a high of 1.25551, it was unable to hold this level and began its precipitous decline from a high of.22892 on the 22.04.2020 to a low of 1.06358 on 15.03.2020. Although ING in a research note anticipate seeing the Euro rally between 1.25 – 1.30 in 2021. On the Daily time frame, we see further consolidation, the rejection of price above 1.2168 and the potential formation of a double top. If price closes below today’s open and on Monday, price breaks below Friday’s close, then this increase the possibility that a short term top is in place and should price close below the low on 09.12.2020 at 1.20587, this would confirm the double top formation and increases the likelihood of further decline where I anticipate price testing the 9 exponential weekly moving average at 1.1932 and perhaps moving much lower towards 1.18149 and 1.17334.

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