The US Dollar Index has ended up testing the same high as last week whilst being unable to continue the appreciation. This coming week, Yellen is due to testify on two occasions: on Tuesday at the Semiannual Monetary Policy Report in front of the Senate Banking Committee, in Washington DC and on Wednesday, at the Semiannual Monetary Policy Report in front of the House Financial Services Committee, also in Washington DC. I am expecting the US Dollar to either continue appreciating or to retrace the week just gone. If an appreciation occurs I am looking for a price rejection at 102.00 price area which will be a significant level in confirming the Head & Shoulder pattern. If instead, depreciation occurs, I am looking for the price to go back to the opening of last week’s Japanese candle at price area 99.50.
This past week, contrary to what I was anticipating, the EURUSD has depreciated 1.74% or a downwards move of 187 pips. A sell continuation is a possibility if the Big Boys want to complete the Inverted Head and Shoulder pattern they have been creating for the past few months. Like the US Dollar Index, two outcomes are probable: either this pair continues its depreciation or a sideways move pattern could be created. This will tell traders that a sell continuation is due.
Trade idea: I will continue to look for sell opportunities in the above currency pair. First sell target is @ 1.0550. If the price continues its descent I will be looking at a second target price area @ 1.0500. There is a probability of not reaching any of these two levels if the Dollar Index decides to correct.