EUR/USD Retests 1.1200 to Kick Off a Busy Week
Matt Weller, CFA, CMT April 29, 2019 6:49 PM
After potentially the quietest quarter in its history, the world’s most widely-traded currency pair finally broke out last week…but the big question for traders is “will it hold?”
EUR/USD spent over five months contained between about 1.1200 and 1.1500 before breaking down to a 22-month low on last week’s big breakout in the US dollar. Crucially, this breakdown corresponded with net short positioning in the euro rising to its highest level since 2016, signaling that the downtrend could potentially extend further from here.
So far today, EUR/USD has bounced back to retest its key previous-support-turned-resistance zone around 1.1200. For traders who missed the initial breakdown last week, today’s retracement back to that area may offer a second opportunity to enter short positions:
Source: TradingView, FOREX.com
While we still maintain a generally bearish posture toward EUR/USD, it’s worth noting that last week’s move may represent a “false break” lower given the clear RSI divergence at the lows. If the pair manages to break back above the key 1.1200 support area, and especially the month’s high around 1.1325, it may mark a significant long-term bottom.
To that end, this week’s economic data will be critical. As my colleague Fawad Razaqzada outlined on Friday, traders will see the latest figures on Eurozone GDP and German CPI tomorrow, US Manufacturing PMI and the FOMC’s monetary policy statement on Wednesday, and the marquee Non-Farm Payrolls report on Friday (stay tuned for our full preview on Thursday!).
One way or another, this week’s data and price action could set the tone for the month of May, if not the rest of Q2, for EUR/USD.
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.