EUR/USD and EUR/GBP drop post ECB meeting while USD/CAD rallies
EUR/USD and EUR/GBP took a hit as ECB ends asset purchase plan and hikes rates while USD/CAD rallies ahead of US inflation and Canadian unemployment data.
EUR/USD tumbles post ECB meeting
EUR/USD trades in three-week lows as the European Central Bank (ECB) decided to end its asset purchase plan at the end of June and raise interest rates for the first time since 2011 in July.
The currency pair briefly rose to $1.0774 on the widely anticipated rate hike announcement but then fell in one swoop to three-week lows, so far to $1.0612 while forming a Bearish Engulfing pattern on the daily candlestick chart. It occurs when the body of a candle – the coloured area between the open and close – “engulfs” the previous day’s body of a candle and does so to the downside.
The long-term downtrend in EUR/USD may thus have resumed with the $1.05 region representing the first downside target zone. It is where the late April and early May lows were made. Immediate resistance can be found at the 7 June low at $1.0653 and further minor resistance along the 55-day simple moving average (SMA) at $1.0717.
EUR/GBP topped out after ECB meeting
After EUR/GBP briefly rallying to a one-month high at £0.8592, to just below the £0.8618 May peak, on the announcement that the ECB intends to hike its interest rates in July - for the first time in eleven years – the cross reversed its trend as the market priced in that the central bank will end its asset purchase plan at the end of the month.
EUR/GBP thus formed a Bearish Engulfing pattern on the daily candlestick chart which occurs when the body of a candle – the coloured area between the open and close – “engulfs” the previous day’s body of a candle and does so to the downside.
Minor support below yesterday’s low at £0.8486 comes in at the £0.8482 late May low ahead of the 200- and 55-day SMA and the 23 May low at £0.8443 to £0.8433. Minor resistance sits at the mid-May high at £0.8534.
USD/CAD breaks through its two-month downtrend line
USD/CAD sharply reversed its trend on profit taking yesterday, ahead of today’s highly anticipated US inflation and Canadian unemployment data for the month of May, out at 1.30pm.
So far a 1.5% rally from this week’s six-week low at C$1.2518 has taken the currency pair through its one-month downtrend line to the 55-day SMA at C$1.2704 and close to the early May low at C$1.2714. Given the strength of yesterday’s bullish reversal, and since a downtrend line has been breached, further upside remains in store for the cross with the 23 May low at C$1.2765 representing the next upside target, followed by the 25 May high at C$1.2885.
Slips should find support along the 200-day SMA at C$1.2662 with further support being found at the 7 June high at C$1.2618.
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