Technical Outlook EURUSD 25.08.2017

Technical Outlook EURUSD 25.08.2017

EURUSD – Draghi’s speech in Jackson Hole is the key event today

The Euro holds within tight range for the second day, as focus turns on speeches of Fed chief Janet Yellen and ECB’s Mario Draghi on Jackson Hole symposium, which are due later today.

Overall bullish structure remains intact and keeps focus at 1.2000 target, with recent pullback from 1.1910 high seen as correction of broader uptrend.
The Euro has been driven by strong bullish sentiment in the recent months and approached psychological 1.2000 barrier after key resistances at 1.1613 and 1.1712/35 (former tops of Aug 2015/May 2016 and Fibo 38.2% of larger 1.3992/1.0340 fall) have been taken out.

Weakening US dollar also helped the Euro’s advance.
Traders are now looking for further signals from the ECB about the start of policy tightening and tapering QE programme.
It is important to mention that Mario Draghi has signaled the start of quantitative easing at his appearance at Jackson Hole three years ago. Draghi has laid the groundwork for the new program that was created to fight serious threats of deflation in the Eurozone, high unemployment and slow economic growth in the bloc.
The measures showed good results and eliminated those threats and the ECB can now start winding down the program.

However, most of observers and sources close to the ECB expect Draghi to stay on hold today, as bond-buying in past three years, worth 2 trillion Euros, gave good results, but stubbornly low inflation continues to worry ECB policymakers.

Draghi will try to avoid scenario of sending strong hawkish messages which could be misunderstood and trigger stronger movements in the market.
Possible scenarios on Draghi’s comments today are for 1.2000+ rally in case of stronger hawkish tone from the ECB chief, which is quite unlikely, according to the expectations that Draghi will stick to the theme of the event: ‘Fostering a Dynamic Global Economy’.

On the other side, neutral / dovish tone from Draghi, which could be expected as ECB’s chief wouldn’t declare mission accomplished until all required parameters are positive (inflation is still well below target) would have negative impact on single currency’s near-term action and send the price lower.
The EURUSD pair faces initial support at 1.1772 (10SMA), followed by rising 30SMA (1.1735) and key support at 1.1662 (17 Aug correction low).
Break of the latter would generate stronger bearish signal for extended pullback from 1.1910 (02 Aug high).
Bullish scenario sees lift above initial barriers at 1.1828/46 for retest of 1.1910 and final push towards 1.2000 target.

Res: 1.1803; 1.1828; 1.1846; 1.1910
Sup: 1.1772; 1.1735; 1.1708; 1.1662