EUR/USD about to turn lower?
Fawad Razaqzada January 25, 2017 6:11 PM
You may have noticed that I have been rather vocal about a potential comeback by the dollar in recent days. So far nothing significant has happened, but that could be about to change as the Dollar Index shows some signs of life around that important 100 level
You may have noticed that I have been rather vocal about a potential comeback by the dollar in recent days. So far nothing significant has happened, but that could be about to change as the Dollar Index shows some signs of life around that important 100 level, as I reported yesterday HERE. Correspondingly, the EUR/USD’s advance has been rejected on an intra-day basis around the 1.0770 level on several occasions now. So, is it time for King Dollar to return?
At the moment, the EUR/USD is basically stuck between a rock and hard place. So far the 1.0710/20 area has been defended after several attempts to break 1.0770 failed. The good news is that a breakout or breakdown is on the cards. The bad news is that at this stage, it is difficult to say which direction the breakout will be and that how far price will go once it does break out. But judging by the behaviour of price action in recent days, I am beginning to think that the EUR/USD will break to the downside. The big clue for me in this regard has been the false break and subsequent failures at or around the 1.0770 level (see the inset) and the corresponding price action on the Dollar Index around 100.
However, the bigger technical picture looks muddled. The refusal of the EUR/USD to hold below that long-term support in the 1.0460-1.0525 area suggests that the worst of the selling may be over for the euro. But even in the short-term outlook, none of the daily support levels have broken down yet. The key level as mentioned is around 1.0710/20, which was previously resistance. Until and unless this level breaks the bias for the EUR/USD remains neutral.
So there you have it: the key levels to watch on the EUR/USD are at 1.0770 on the upside and 1.0710/20 to the downside. If the support level gives way then it is reasonable to expect a sell-off towards that long-term pivotal area around 1.0460/1.0525 again with an interim support level coming in at 1.0630. Conversely, if the 1.0770 level breaks then there is little further resistance until 1.0850/70 area, which means it is reasonable in this scenario to expect a quick rally. But my base case is that the EUR/USD will break lower.
Source: eSignal and FOREX.com
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.