EUR/USD: Heading (and Shoulder-ing) Lower?
July 17, 2019 10:23 AM
Over the last nine months, EUR/USD has been contained to a miniscule 400-pip range between 1.1100 and 1.1500 (barring a two-day foray above 1.15 at the start of the year)! That said, the current technical setup points to an elevated risk of a potential breakdown in the coming days.
While it’s at no risk of losing its title as the world’s most widely-traded currency pair, even the most diehard EUR/USD traders are getting fed up with the pair’s lack of volatility. Over the last nine months, EUR/USD has been contained to a miniscule 400-pip range between 1.1100 and 1.1500 (barring a two-day foray above 1.15 at the start of the year)! That said, the current technical setup points to an elevated risk of a potential breakdown in the coming days.
Specifically, rates have carved out a continuation head-and-shoulders pattern over the last six weeks, and the pair is now testing the “neckline” of that pattern. A breakdown below support in the 1.1200 area could project a 200-pip continuation lower, potentially taking the pair down toward the 1.1000 handle, though bears would obviously have to overcome support in the 1.1100 area first.
Source: TradingView, FOREX.com
In terms of fundamental catalysts, next week’s ECB meeting looms large. Yesterday, Goldman Sachs noted that the market had discounted around EUR 100-150B in quantitative easing (QE) at the central bank’s September meeting, and that there was a risk of a larger EUR 200-250B QE announcement.
If the ECB uses next week’s meeting to lay the groundwork for a big dovish shift later this year, EUR/USD may finally wake from its slumber and resume its longer-term downtrend.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.