EUR/USD rally showing signs of exhaustion after dollar’s big slump
Fawad Razaqzada September 8, 2017 5:41 PM
From a technical perspective, there may be a possibility we have seen a near-term top, although at this stage this is just a potential scenario.
As the dollar sold off again, the EUR/USD managed to climb to a new 2017 high of around 1.2090 this morning before pulling back as traders booked profit ahead of the weekend. From a technical perspective, there may be a possibility we have seen a near-term top, although at this stage this is just a potential scenario. At around 1.20-1.21, we already know that the EUR/USD is testing key long-term levels, and the ECB is evidently becoming worried about the high exchange rate even if it hasn’t said so explicitly. Interestingly, the EUR/USD has not yet managed a daily close above 1.2040/45 area, which was the last significant low hit back in July 2012, when the Eurozone debt crisis was at its peak. Once support, this level could potentially turn out to be the new long-term resistance going forward. What’s more, the EUR/USD looks like it has failed to hold its break above the prior 2017 high of 1.2067 hit at the end of August, when it formed an inverted hammer candle. Today’s price candle also has a similar shape. These types of candles point to exhaustion and with the RSI also in a state of negative divergence with price (as it has made a lower high near ‘overbought’ level of 70), one can make a case for a EUR/USD reversal here. That being said, though, none of the key support levels have broken down yet to suggest the sellers are taking charge. First and foremost, the bears need to see a break below Thursday’s close of 1.2015. Once this condition is met then they require a break in market structure. The last swing low was at 1.1825 prior to the latest rally. Any move below 1.1825 would technically be bearish as we will then have our first lower low. So taking everything into account, at this stage this is a potentially bearish setup for the EUR/USD. But the bullish view could easily re-establish upon a decisive break above that 1.2040/5 level. In this potential scenario, the bulls may then aim for the next Fibonacci extension levels at 1.2133 (127.2%) and then 1.2218 (161.8%). In any case, the next move on the EUR/USD could be very interesting to observe next week.
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.