EURUSD technical outlook for the month of August 2016
The medium-term uptrend is the EURUSD pair is still intact after forming the initial bottom towards the 1.05223 level, low of 3rd December 2015.The pair has managed to form nice higher high associated with lower lows after hitting the low of 1.05223 to form the medium term uptrend against the long-term prevailing downtrend. On 3rd may 2016 the pair has hit a significant key resistance level 1.16163 in the daily chart and started to move downward in favor of the long-term bearish trend.
The bearish movement of the pair formed a nice descending channel pattern in the EURUSD pair indicating fresh selling pressure in the pair. However, in the event of recent FOMC meeting minutes, the pair has managed to breach the ascending channel resistance and showing some strength which might help the pair to test the major resistance level of 1.16163.
Current price action scenario doesn’t give the clear indication for long-term price movement for this pair. The break of 1.16163 levels is needed to turn the bullish momentum of this pair. On the contrary, the bearish continuation in favor of the long-term downtrend will be triggered by the decisive break of the low 1.05223 level.
If the pair manages to break the level 1.1616 then we can see some strong buying pressure in this pair which will eventually drive the price towards the 1.2000 level. The break is very important for the traders since this critical resistance level is the only obstacle which is limiting the pair to rally more than 1000 pips in the upward direction. But most professional traders believe that there will be lots of false spikes if the market turns bullish so that all the retail sellers are knocked out from the bull markets.
On the contrary, for bearish momentum the market needs to clear the first initial support which is situated at the level 1.10436 zone. Most professional traders believe that the market will face immense difficulty in overcoming this level. However, if the pair manages to breach this level we can see some fresh sellers from that level which will drive the price to the next key support level situated at 1.10436 levels.
Let’s see the technical parameters in the EURUSD chart in the daily time frame.
Figure: Technical analysis of EURUSD pair
From the above figure, it’s very clear that the medium-term uptrend in the daily chart is still intact and the pair has also retraced 50% of the initial upward move. This is very important at this stage for the bulls since the pair has managed to breach the descending channel top. The short term bull traders are cautiously waiting for the minor retrace of the pair towards the channel top resistance which turned into support for this pair. On the contrary, the conservative traders will wait patiently until the market drops back towards the 1.10436 level. Since the daily RSI of this pair is still in the overbought region long term investors believe that there is more downward fall for this pair.
The weekly chart in the EURUSD pair is showing strong bullish momentum. Many short-term traders are making a significant amount of profit by trading the bullish retracement of this pair. According to the long-term traders, the pair will test the high of 1st may until it shows some bearish momentum. Long-term investors are advised to stay on the sideline till the market climb towards the 1.1616 level. Professional traders will enter their short trade near that region with price action confirmation signal. If the pair fails to break that high then there will be a massive drop in the EURUSD pair which will exceed more than 1000+ pips and the long term bearish trend in this pair will again come into play.
In the weekly chart, the EURUSD pair is facing a strong dynamic resistance of 100-day simple moving average. If the pair manages to have a weekly close above the 100-day simple moving average then we can expect some bullish momentum until it reaches the first critical resistance level of 1.1616 level. If that level fails to restrict the bullish momentum than we will definitely see a strong upward rally in the pair towards the 200 days simple moving average 1.2000 level. On the contrary, if the 100 day MA provides enough resistance to this pair then we can see a sharp move towards the low of 1.0450 levels. In the monthly chart, the pair is showing a range movement which is yet to breached. Professional traders are making the use of 1.14133 levels for selling opportunity and buying the monthly support 1.08180 levels. Trained professional believe that this consolidation pattern will come to an end once the FED gives a clear view of their interest rate decision. To be precise it better to look for selling opportunity in the EURUSD pair since there are lots of obstacles in the upward direction. On the contrary, there are some minor supports to holds its decisive move in the near future. Most professional will look to sell this pair at a higher price in favor of the long-term prevailing downtrend.
Summary: The EURUSD pair showed some bullish momentum for the last three month. However, in the past weeks, the pair was in a correction in favor of the long-term prevailing downtrend. Though the market will give enough buying opportunity but buying this pair at such level will be an immature act since the long term down trend will be overlooked. It’s better to sell the critical resistance level of this pair with a very tight stop loss. Price action confirmation signal should be used while selling this pair at higher prices and proper money management is the key factor in trading this pair successfully.