EUR/USD: Is the Euro Running Out of Momentum?
The EUR/USD currency pair has been rising for over two weeks now, making a significant low on the same day as other USD currency pairs did too. Unlike some other currency pairs where the rise was orderly, and in the case of GBP/USD even mostly contained within a bullish linear regression analysis price channel, what we have seen here is a jerky move higher including some strong tops and bottoms.
The current situation of this currency pair is challenging because it is not clear where it is going but it cannot be said to be consolidating either. Is there any way we can find some clarity?
Top Regulated Brokers
In the absence of any major news concerning either the Euro or the US Dollar – we can say that the very high-impact items for these have passed behind us for now – and given the fact that we are in the high summer month of July, there will be strong forces working to put the EUR/USD currency pair into ranging behaviour. If this is correct, then a predictable range could be easy to trade and provide some interesting opportunities soon. This currency pair likes to range and so it’s a great instrument to range trade.
Another reason why watching this pair is timely is that we start to see signs of real exhaustion in this two-week move higher. There seems to be a squeeze from above.
EUR/USD Technical Analysis
The price has been advancing since 24th June after the strong US Dollar Index was unable to break above a key resistance level at 101.39. It is a jerky advance which looks unreliable and prone to strange movements. We have a new development which is bearish: the triple top, or at least double top, just below the resistance level at $1.1465. Above that level we have another horizontal level not far above and the big round number at $1.1500 so the bearishness below this area is not surprising.
As the price looks unlikely to be able to advance, the line of least resistance is lower, and there is a lot of room between the support levels at $1.1400 and $1.1315 for the price to fall. The problem is, there are several bullish inflection points within that area, and the journey upwards here was jerky, so I cannot expect a smooth move lower – if it happens, it will be more of a grind.
My Take on EUR/USD
I think that we are most likely to see a move down, but the movement is likely to be unpredictable. There is clearly strong resistance near $1.1465 so I would love to take a short trade from another rejection of the area between $1.1463 and $1.1450 where we have just seen the third top. An alternative plan for finding a short trade would be to wait for a decisive bearish breakdown below $1.1400, ideally entering short upon a failed retest of that level from below.
Review, Support & Resistance Levels
In my previous EUR/USD analysis on 29th June, I was looking for a short trade from $1.1379 but this did not set up.
Risk 0.75%.
Trades may only be taken prior to 5pm London time.
Short Trade Ideas
Short entry following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.1463, $1.1487, or $1.1528.
Put the stop loss 1 pip above the local swing high.
Adjust 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 ride.
Long Trade Ideas
Long entry following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.1421, $1.1400, or $1.1315.
Put the stop loss 1 pip below the local swing low.
Adjust 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.