Thursday, March 22, 2018
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EUR/USD risks double top bearish reversal on widening mon pol divergence
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  • Fed is seen plotting faster rate hikes.
  • On the other hand, the ECB is arrested by low inflation data.
  • EUR/USD risks falling below double top neckline support of 1.2206.

The new Fed chair Powell’s unambiguous approval of the strong US economy is being read by markets as a sign that the central bank will not shy away from raising rates at a faster pace. This is evident from the rise in the US dollar post-Powell’s comments.

Meanwhile, the European Central Bank (ECB) minutes released earlier this month showed the policymakers are still reluctant to change its monetary stance just yet.

So, the monetary policy divergence is widening in favor of the US dollar and hence the spot risks falling below the double top neckline support of 1.2206.

The bearish double top reversal may happen today if the Eurozone preliminary CPI prints below expectations and the second estimate of the US Q4 shows the economy expanded at a faster rate than previously reported.

EUR/USD Technical Levels

A daily close below 1.2206 (double top neckline) would signal the rally from the January 2017 low of 1.0341 has ended and open doors for a drop to 1.2089 (Jan. 4 high). A violation there would expose the all-important psychological support of 1.20.

On the higher side, a daily close above 1.2355 (Feb. 26 low) would revive bullish view and may yield re-test of the recent highs around 1.25.

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