Top Regulated Brokers
The EUR/USD currency pair is falling more decisively than it has for a while. It has reached a state where many institutions will be entering short trades, betting that it will fall further. This pair tends to trend slowly and with lots of pull backs, so it can be confusing and challenging to take a longer-term position.
The most important question for traders is whether we are seeing a lasting trend really starting to get underway, or are the historic lows which held below the current price likely to prevent further meaningful falls?
Markets are reaching an important juncture for several reasons, all of which could affect the outlook of the EUR/USD currency pair:
The US Federal Reserve held a policy meeting last week which produced a hawkish tilt as markets moved from expecting no rate changes this year to expecting one rate hike of 0.25%. This has sent the US Dollar Index rising to a 1-year high price, and after one year of consolidation, we are finally starting to see some directional momentum.
Risk sentiment is weaker as this new week gets underway compared to last week, as the start of USA/Iran peace talks in Switzerland saw wildly differential rhetoric from President Trump (threatened to bomb again) and VP Vance (“we want to turn over a new leaf with Iran”). Markets are learning to filter out the noise, but it still produces a chill.
There was a policy meeting at the European Central Bank last week, so that is out of the way and markets will not be waiting on further policy input from that direction.
EUR/USD Technical Analysis
The price made a notable bearish breakdown last week, driven lower by the more hawkish approach taken by the Federal Reserve. Last week saw the lowest daily close in fifty days, with moving averages supporting a bearish approach technically – this will have triggered a lot of short trade entries by trend traders, who take an interest in this currency pair as it has a strong record of trending over the long-term.
The price is slowly moving lower at the time of writing, moving between last week’s bottom at $1.1418 and the nearest resistance level at $1.1487. The move is slow, but there is bearish momentum over the short-term as well as the long-term, which is a positive sign for a short trade.
Below $1.1418 we have a price area which is basically the 1-year low, so a bearish breakdown below the round number just below that, which could also be supportive, would be a major bearish technical change and send the price into blue sky.
My Take on EUR/USD
Everything suggests bearishness, and enough bearishness to venture into a short trade – I went short earlier today. The major potential obstacle which is facing bears is the confluence of a one-year low price, horizontal support, and a round number between $1.1418 and $1.1400.
More aggressive traders might want to go short right away while there is still some distance to $1.1418.
More conservative traders might want to wait for the price to get established below $1.1400.
As this currency pair tends to make deep retracements within trends, another conservative approach could be waiting for the price to retest the resistance level above at $1.1486.
Review, Support & Resistance Levels
In my previous EUR/USD analysis on 17th June, I thought that the EUR/USD currency pair was likely to rise over the day, and that the support just below $1.1600 would hold, but I was ultimately wrong about both.
Risk 0.75%.
Trades may only be taken prior to 5pm London time.
Short Trade Ideas
Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.1487, $1.1528, $1.1557.
Place the stop loss 1 pip above the local swing high.
Move the stop loss to break even once the trade is 20 pips in profit.
Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.
Long Trade Ideas
Long entry following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.1418, $1.1401, or $1.1361.
Place the stop loss 1 pip below the local swing low.
Move the stop loss to break even once the trade is 20 pips in profit.
Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
There is nothing of high importance scheduled today concerning either the Euro or the USD.
Ready to trade our daily Forex signals? Here is our list of the best Forex brokers worth reviewing.