Draghi changed the eur/usd direction | 16 May 2014

 Euro

The technical picture supports prospects for further pair reduction the course of which still shows a considerable overbought on main timeframes. The pair wave structure demonstrates the completion of the previous cycle and reverses the upward movement of the single European currency to a new downward cycle.

The support levels are 1.3715-1.3735 and the resistance levels - 1.3780-1.3800.

MACD histogram shows the south direction, indicating the downward price movement.

Trading recommendations

We assume the previous decline completion in the price zone 1.3725 ÷ 1.37; then we expect a pullback and the tentatively rise to the target levels: 1.3773; 1.38. Further, we expect the decrease resumption towards 1.3745 and then to the target levels: 1.37; 1.3668 and possibly below.

Pound

Thoughts that the British economy, through an economic development is already on the verge of rates raising, at least are premature. In addition, the impressive growth performance in recent years starts to disappoint. Industrial production slightly decreased in March after the February growth. GDP fell short to predicted value. Against this background, the way upward is becoming increasingly problematic.

The support levels are 1.6820-1.6840 and the resistance levels - 1.6910-1.6930.

MACD shows a south direction, indicating the downward movement.

Trading recommendations

Now the pound is trading at five-year high. Here it goes the strongest resistance - 1.70. The market is already tired of the continuous growth. To support this growth, we need more strong performance, further supporting the economic recovery. However, it becomes quite difficult to ensure it. Besides, indicators are overloaded and show that the pair is overbought.

Yen

The demand decrease at the stocks markets will pressure the pair, we can expect the decline to the 101 figure. After the retail sales publication in the United States, we expected "bulls" activity – the moderately positive rising employment and consumer confidence in the world's largest economy will support the demand for the U.S. dollar.

We expect a good GDP which will support the demand for the Japanese currency.

The support levels are 101.40-101.60, and the resistance levels are 102.23-102.43.

MACD histogram shows a horizontal direction, indicating the corrective price movement.

Trading recommendations

We expect a lateral trend within the price range 100.50 - 102.80.