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EUR/USD: Complex monetary issues. Euro's tricks possible?


The situation with the euro was rather complicated. On Friday, it was expected to test 1.1700. Besides, it would be absolutely logical considering the technical picture and the published macroeconomic data. However, the euro has fallen quite unexpectedly. The major analytical companies were silent at that moment, as if nothing occurred. Why? There was nothing to comment, the situation was really non-standard. EUR/USD dropped below 1,1550, it has not climbed this level since mid-October. Technical analysts believe that stops may have been accumulated behind this level.

Besides, Monday ended unconventionally, the sharp recovery of the European currency above 1,1600 came as a surprise. At the same time the technical picture in the morning looked totally pessimistic, market players were expecting the test of the support at 1.1525.

It is common that on Monday there should be a rebound after the sharp fall on Friday. However, the growth is considered excessive. The pair is unlikely to demonstrate further significant strengthening. The quote is most likely to continue trading between the levels 1.1570 and 1.1630. Though, judging by illogical movements within the last two sessions, anything is possible.

Currently, it is possible to say post factum that there was just a jump in volatility. However, the market was stable before the Fed's significant meeting, which results will be announced on Wednesday.

Sometimes the direction of the pair is obvious after the data releases. However, at this moment the quotes are forced to move in the opposite direction and only later they continue movement in accordance with the data.

As for the Fed meeting, it is not obligatory for major players to wait for its outcome. Besides, everything is clear. The Fed will announce the beginning of stimulus reduction in November, probably in December, though it is not significant. This event is included in the price. However, concerning the volatility of the EUR/USD pair on Friday and Monday, major players do not need any news and special reasons to move the price.

Meanwhile, after the jump in volatility most analysts continue to adhere to the initially voiced forecast for the euro. The UOB Group was also discouraged by the euro's illogical moves. Analysts are confident that if the euro closes below the strong support at 1.1525, the price will retreat to 1.1465. The chances for such a scenario are high. Besides, they will increase in case the pair does not break a strong resistance at 1.1645 in the successive sessions.


Breakout is possible. According to experts, it will be a signal of euro traders weakness and may cause a wide range of trading for a while.

However, the nearest resistance is indicated at 1.1630. Besides, it might be too strong for the euro, which was able to start the technical correction. Despite the lack of surprises from the Fed and the transparency of its actions, the forthcoming session will hold the market players back from unnecessary movements.

The pair is likely to keep fluctuating between the current technical levels until the Fed verdict on the monetary policy is announced.

The support is located at 1.1600 (psychological level, 100-SMA), 1.1580 (static level) and 1.1550 (static level). The current year's low is further, at 1.1525.

The euro's closing above 1.1670 will immediately open a way for bulls to 1.1700. However, it is unlikely before the FOMC meeting's outcome.

The material has been provided by InstaForex Company -