EUR/USD Technical Analysis | Forexlive
On the daily chart below, we can
see that the price is finding support in the 1.07 area and the trendline. The sellers will need to break
below that zone to start targeting 1.05. The moving
averages are pointing to a continuation in the downtrend that started with the
surprisingly strong NFP report.
The market is currently repricing
interest rates expectations with increasing chances of another 25 bps hike in
June and almost no rate cuts expected for this year. Right now, good news
should be bad news as the market may be worried that what the Fed has done
until now may not be enough to return to their 2% target.
Yesterday’s retail
sales report showed a big surprise to the upside and that should be further
confirmation that the Fed is not done and the US Dollar should come back.
On the 4 hour chart below, we can
see that after bouncing from the support at 1.07, the price pulled back to the
1.08 level where we also had a previous swing level resistance and the 38.2% Fibonacci
retracement level.
It’s clear that we are in another
consolidation here between 1.07 and 1.08. Given the fundamentals though we
should see the price breaking down out of the range and sell off to the next
support at 1.05.
On the 1 hour chart below, we can
see more closely the current ranging price action. One can also point out two
different chart
patterns that without the fundamental context point to two different directions.
We can see a possible double top at 1.08 formed within a downtrend which would
make it a continuation pattern in this case, and an inverted head and shoulders
at 1.07 which would make it a reversal pattern after the downtrend.
The reality though is that it’s
just a range and we can often see spikes out of the ranges. The best strategy
would be to wait for a breakout of the range before taking positions or
“playing the range” buying at support and selling at resistance with defined risk.