EURUSD - Shooting star? Fibonacci Extension target? Full breakdown of the direction

Key points:
EURUSD failed to continue rising, the price dropped yesterday to form a shooting star, opened lower today.
This pair short-term bullish bias, but long-term partial bearish due to the European Central Bank QE continued policies.

Above is the H4 chart for EURUSD, EMA 20 is current acted as a solid support and provide bullish momentum. If investors are shorting this pair, be careful that the short / long ratio reached 2.5: 1.
The above emotional side and short-term outlook  is up, but the technical side is down. In addition to the formation of the shooting star, traders should pay attention to the resistance zone formed in October - if the traders think the resistance zone in October will not be broken, then 1.1550 near the potential support of the euro / dollar. However, given that the price has broken the resistance zone of 1.1685 to 1.1736, the pair may also use the 1.1736 level to establish a higher low to further raise the exchange rate and launch an impact at 1.2000 key psychological levels.
(Noted that 1.2000 level is also the fibo 1.618 target)




EURUSD fell as low as 1.1550 after the European Central Bank meeting in October. However, this week Germany's third quarter GDP earlier than expected initial annual rate of weakness with the recent impact of the dollar, the euro / dollar in a short test of the 1.1685 to 1.1736 resistance area formed a breakthrough, the highest rose to 1.1861 yesterday. So it might provides a short term support for EURUSD. However, the price retreat after that, forming a "shooting star pattern."



Shooting star shape generally means the price will be reversed, because the previous day's multi-trend trend failed to establish a real increase, while the short turn is in control of the situation.


Of course, the technical indicators may not be inaccurate. Therefore, to determine the recent rise of the pair is to see more callback and the weekly close. So traders can also decide at their own discretion whether to do more EURUSD or short EURUSD.

The bearish outlook for the EURUSD is mainly in the long term, affected by the expected impact of the market's sharp rise against the pair this year. As we all know, the EURUSD rose sharply this year, mainly because the market expects the ECB will exit the stimulus this year, and eventually raise interest rates. The market once thought that the ECB will raise interest rates twice in 2018, each time a minimum of 10 basis points. But the problem is that the ECB has never given up its dovish, passive monetary policy. Although the asset purchase plan was reduced to 30 billion euros per month in the October interest rate resolution, this does not mean that the ECB will become hawkish.

If we take into account the policy statement accompanying the October interest rate resolution, it is not hard to find that the ECB estimates that it will not raise interest rates until 2019. However, if the Fed continues its austerity measures, the differences between the two central banks will grow bigger and bigger. This means that the EURUSD exchange rate is overvalued - a pair that recently pulled back 30% of this year's gains, but the bulls quickly took control of the situation and only managed to pull back an 18% gain. Therefore, the euro is still relatively strong in this pair, despite the recent short side of the euro.

It is worth to note that every time the RSI above 70, its in over bought condition. Such indicator is reliable on longer time frame, hourly and daily charts, but it is also taking more time for correcting.

In summary, the bearish outlook for EURUSD is mainly due to the market may see a change in ECB rate hike expectations. Shorting the euro means seeing the shooting star that formed yesterday as a lower high and looking forward to further price correction.

For more analysis and researches, please follow: AMMOSIGNALS