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Today’s Trading Edge: EUR/USD rallies as Fed’s Yellen speech unimpressed dollar bulls

Posted by WorldWideMarkets . on Apr 10, 2017 8:39:38 PM

 WWM EURUSD APR 10 2017-1.jpg

The euro rebounded against the dollar and trades around the key $1.06 following the Federal Reserve Chair Janet Yellen’s speech in Michigan.  She noted that the US economy now is pretty healthy and that it is appropriate to gradually raise Fed Funds rate.  She also stated that our estimate of neutral rate is really not that high.  She reiterated that the Fed cannot wait too long to tighten.  She also added that she could not have imagined that interest rates could sit at zero for 7 years. 

Despite the poor non-farm payroll report on Friday, the greenback has not had a significant pullback.  Uncertainty regarding the French Presidential election has kept the euro heavy and recent polls show leftist Melenchon is gaining momentum.  The first round of the French presidential election will be held on April 23rd.  All the polling suggest that no candidate is expected to win a majority in the first round, and a run-off election between the top two candidates will be held on May 7th.

Price action on the EUR/USD daily chart shows that euro is firming up and if it can recapture both the 50- and 100-day SMA(s), we could see a major rally towards 1.08.  If bullishness continues, further upside could target the 200-day SMA, which currently trades at 1.0853.  Major resistance remains the psychological 1.10, it is around that area that price could form a bearish Butterfly pattern.  To the downside, the 1.0400 to 1.0450. zone remains major support. 

The trade: Buy EUR/USD at 1.0575 with a stop loss at 1.0525 and a take profit at 1.0725. The Risk/Reward Ratio is 1:3

Topics: Federal Reserve, EUR/USD, $EUR, EURUSD, GBPUSD, USDJPY, USDCHF,, Janet Yellen


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