EURUSD has once again been rejected at 1.18 after Monday's ECB bullish spike. Is this currency pair turning bearish ahead of FOMC on Wednesday?
1.18 has become a significant price resistance level. Price attempted to break above it last week but quickly surrendered to the mid 1.17s. Draghi's speech yesterday was unusually hawkish. He commented that wages are picking up and inflationary pressures are getting high. The market perceived a possible September rate hike and EURUSD spiked to 1.1815 - its highest since mid-June. However, the rally didn't last and price quickly dropped to the lower 1.17s. Price opened today and rallied back to the upper 1.17s but now back to the mid-1.17s as tension grows toward the Fed rate decision on Wednesday.
EURUSD - Technical Overview and Important levels
Yesterday, price returned to the neckline of the inverted head and shoulder pattern that completed last week. After price bounced off the neckline, it rallied to 1.1815 but couldn't continue further. Price pattern formation is now looking bearish with 1.18-1.185 staying as an important resistance zone. Only a bridge above the zone would sent price upwards again. The chart below shows the new technical forecast.
Just at the top of the neckline, there is a bearish wedge pattern which has just completed but requires a price confirmation. With this pattern, EURUSD looks bearish. The nearest barrier for the bears is the neckline. A bridge below the 1.1720-1.1735 neckline would be a required confirmation. If the breakout is significant, price will be expected to drop to 1.1550-1.1525 support level. On the other hand, if price persists above the 1.1720-1.1735 neckline and advances to 1.18-1.1815 once again, the bulls might win finally and send price toward 1.2. A lot also depends on the FED decision tomorrow.
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