EURUSD TECHNICAL ANALYSIS

The EURUSD is among the most traded currency pair in the world. It actually represents the two world’s largest economies (Europe and the United States of America). The Euro pound was invented to enable the cross-border trade of the European Union trading partners. From the time it was invented in 1999, this currency pair has faced a lot of volatility.

The various important past levels on the trading chart to watch out for

The first is the 1.1535 which is a monthly support level. This can be noted if you contract the chart to the monthly timeframe. The level is very evident in May 2016 and also the period before that. This creates a support range around the 1.15 level.

Then there is the 1.1460 which is seen as a crucial resistance level in 2015. It is one thousand points above the multi-year lows.

The 1.1410 level acted as a cap for the pair in early June, 2016.

The 1.1375 level was a resistance level in February and also a support level in May 2016.

The 1.1190 level was the post-Brexit high and it was reached in July.

The 1.1125 level acted as a cushion for the pair in early September,2016.

The 1.1000 level is a significant resistance level.

The 1.0905 level acts as a swing low and also works as a weak support level.

The 1.0825 level served as support level in March 2015 and traders should very much keep an eye on it since it is the triple bottom now.

Anticipated market activities

Traders are very prepared for the ECB’s Draghi’s press conference. But even before the conference takes place, the EURUSD has already tested the upper trend line which cuts across at the level of 1.1318.

The Euro dropped against the US Dollar, after the formation of a bearish Harami candlestick pattern. This was after the market prices tested the trend line. A breakout of support levels  since late July gives a clear hint for the resuming of a longer-term downtrend.

Over the past few days the EURUSD remained even after somehow relevant commentaries. However, the   ECB President Draghi’s speech cause some market movements as the euro is expected build some momentum following the announcement. On the 4 hour timeframe chart, the market prices em to be bouncing off the lower central line. This gives an indication for a further upside movement that could probably push the EURUSD pair back to testing the resistance level the region between 1.1280 and 1.1270. If the prices establishes a resistance at this region, it could signal a further downtrend, where the 1.1200 will be seen as the first support level and more to follow if there is a break below this support level. On the contrary, if there is a daily close on top of the 1.1280 level, it could be showing a further uptrend; where the 1.1341 level will become the main resistance level.

Fibonacci levels

If the market prices break below the 38.2% Fibonacci expansion at 1.1097 level, they set the door wide open for a test of the 50% retracement level at 11014. But in case there is, a daily close above the resistance region between the 1.1200 and 1.1215 which is at 23.6% of the Fibonacci trend line the market prices may end up hitting he next resistant level at 1.1263, which is at the 14.6% Fibonacci expansion level.

But in the beginning of the week, there was a gap-filling bounce that offered an acceptable risk/reward with and a short trade being triggered at 1.1207 setting an eye at the 1.1097 target. If so traded, there should be a stop loss at around the 1.1260 level.

Why is a prolonged bearish movement likely?

The downtrend witnessed on the EURUSD could persist for yet a longer while. This is due to the fact that the European Central Bank has not yet achieved its primary goal of attaining an inflation. Therefore, maintaining a considerable amount of pressure on the euro is critical for them to at least get closer to a higher inflation.

The European Central Bank may be yet to take action, since this may be a bit premature. However, there is most probably an upcoming move by the Central Bank that could help in pushing the euro down.

Also, there is a probable high in the rates even if the Fed is not very sure about when this move will be taken.

Also the ZEW Survey in September focuses on this pair. This can help in elaborating on the Euro economic environment after the Brexit vote.

Immediately after the Brexit vote, there was a fall in the review on Brexit related instability apparently against the background of stresses on fare prospects and the dependability of the European banking systems as well as other financial systems.

All things considered, the most recent review saw a growth in certainty as uncertainties reduced by some degree in the short term in the Euro zone and in the UK zone.

Information in the Euro zone has disintegrated contrasted with agreement gauges, as indicated by Citi Surprise Index, inferring a potential shortfall in today’s numbers.

So, the ZEW numbers appear to have generally lessened effect on the Euro of late, inferring that a huge miss may be necessary to shake the pair.

However, there are other advancements that could prove to be more critical, as the last two trading days saw expansive swings with worldwide bonds falling, obviously also pushing stocks lower, conceivably against the background of ECB inaction and potentially a BOJ approach shift.

So, do I go short or long?

Most indicators says it is time for short term sell orders. But you should do so with an eye on the 1.1100 support level.

There are other support levels to look out for in the short term, and they include the 1.1200 level, 1.1150 level and the regions above the 1.1150 and 1.1135 levels.

The levels of resistance to watch are  1.1250 level, 1.1275 level, 1.1300 level, and the 1.1325 level.

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