EUR/USD Set To Extend To 1.1750-1800 Target

10 gen 2019

The Euro vs US Dollar reveals more clues that you probably may be aware of, so let’s break down all the clues we can obtain. Firstly, if we were to draw a volume profile that captures the entire length of the range seen, you will notice how the 70% value area was concentrated in a 1 cent box between 1.1330 and 1.1430/40 (slight adjustment to align it with closes). This allows us to draw an internal range. Similarly, we can draw the borders of the recently broken range at the extremes of the volume tapering, with the sell-off through Nov 12 shrugged off given the subsequential double bottom found at the 1.1270 vicinity, suggestive of fair value creeping up. Therefore, the external range could be taken from the mentioned low end up to 1.15.

Why is that important, you may be asking? Firstly, because it allows us to tap into the power of market symmetry to anticipate the next macro target, which should be found at the 100% projection target based on an external range size of about 230 pips. In other words, I am looking circa 1.1730–50 as the area where the current buy-side campaign should mature. However, like any hypothesis, we need to ask ourselves, is this thesis a valid one? If you notice, the first breakout has landed to the pip to the first target of 1.1560, which strengthens the notion of the idea playing out as anticipated.

We can also see observe how the movement in the Euro aligns with both the macro and micro divergence between the German vs US bond yield spread and the pricing of the pair. We can crosscheck the fair value of the EUR/USD from a yield spread perspective by re-anchoring where the pair was trading the last time the bond yield spread was dealt at these levels. This results in a target of around 1.18, although one must bear in mind its dynamic essence, as it depends on the ever-evolving spread. However, as a rough estimate, this target does convey an objective message to justify higher levels from here.

Given that the pair has achieved two consecutive impulsive runs away from its saturated range, we can also ask ourselves a sensible question. At what point would the bullish scenario be negated? The answer here, again, can be found by extracting the information from our risk profile diagram. Notice, the area around 1.14 acted as the most heavily traded level during the span of the range? It’s therefore logical to think that any acceptance sub the mentioned round number would imply a failure back towards the old range dynamics.