EURUSD – Next dip to 1.0845 looks like a buying opportunity

ECB fired on all fronts -refi rate cut, deposit rate cut, QE expansion, LTROs – and delivered the goods that markets wanted.

In response the Euro tumbled across the board. The hourly EUR/USD chart shows the head and shoulder formation was breached and the target was achieved at one go.

EURUSD H1 (03-10-2016 1856).png

For me, the drop is likely to end up being a trap for the bears. I am certainly not expecting a sharp rally, but a rise to near 1.0950 levels as very much possible over the next few days.

I have my reasons for that and they are –

  • Monetary easing, especially rate cuts are not well received by the markets these days
  • Gold hasn’t reacted positively
  • EUR/$ finding support around 1.0945, a level which repeatedly saw influx of fresh bids a few days back
  • There is nothing more Draghi can do at press conference
  • Hence, in my opinion, we may see another wave of selling and an intraday low of 1.08 before the reversal begins.

I would look to buy anywhere around 1.0845/between 1.0845-1.08 levels for target of 1.0945 with small..very tight stops

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