It would be easy to
take the euro sell-off today out of context of the dominant psychology of the
EUR/USD or even EUR/JPY. Looking at both the daily charts of these pairs, it’s
easy to see that neither has a trending Directional Bias, notably the chop on
the EUR/USD. Regardless of the fundamentals, the technicals were pointing to
exhaustion and a possible sell-off. Let’s take a look at the clues and where
the pair will go from here.
The Draghi-fueled euro sell-off came
as the confirmation of the slowdown in Europe and continuing struggles were
echoed by the ECB President and no one
likes hearing bad news. The bleaker outlook overshadowed the expected 25
basis point cut which is now seen as a band-aid rather than stimulus.
Past performance is not indicative of
future results
The
EUR/USD sell-off may be the focus but the move lower must be taken within the context
of the choppy, sideways range it is trading within. Notice the GRaB candles
have been mainly red but there are just enough blue (neutral) candles to keep
the 34EMA Wave from taking on a “four to six o’clock” angle.
Past performance is not indicative of
future results
The
current 34EMA Wave angle is “two to four o’clock” and this means that the daily
is congesting which opens to door to patterns like a triangle. Depending upon
the EUR/USD’s next daily candle, there is a possibility that the pair is
squeezing into an asymmetrical (ascending) triangle pattern.
The break of the 1.2400 major
psychological level ushered in the fairly predictable run lower to the 1.2380
minor psychological level. The support that the slight wick below today’s
candle is poised to leave appears to be the exhaustion at the other end of the range. While the
downside is the path of least resistance, the euro has been incredibly resilient
and short sellers getting active below 1.2300 have already been burned.
Considering this, it would be prudent to lighten the load on a short position
and aggressive traders could even consider getting slightly bullish near
previous lows (support).
Past performance is not indicative of
future results
Don’t
look at the downtrend line break as a momentum trigger. While the triangle’s
downtrend like was broken, the underlying market trend is not appropriate for a
momentum entry, but rather a distribution fade that would view today’s move as
exhaustive.
Interestingly the U.S. Dollar Index is
exhausting right at the downtrend like of a triangle of its own on the daily
chart. The “two to four o’clock” angle of the daily suggests that the environment
is NOT right for a momentum breakout through the downtrend line resistance that
has been pierced today but rather exhaustion.
As an
active forex trader and Chief Currency Analyst for InterbankFX.com I do write
for a number of sites all over the web and I am happy to say that I will be
posting updates atwww.IBFXconnect.com. MyActivity Boardwill feature the trades from my trading account as well as
intraday commentary.
Start the discussion! Questions?
Comments. Leave it here at the Daily Forex Trading Edge for Raghee to
personally answer. Using the icons at the top of the article to forward this
update to a friend via email, post it on Google or Facebook or simply print it
out for reading later.
Forex trading is one of
the riskiest forms of investment available in the financial markets and
suitable for sophisticated individuals and institutions. The possibility exists
that you could sustain a substantial loss of funds and therefore you should not
invest money that you cannot afford to lose.
Posted By:
Raghee Horner
Raghee Horner, chief currency analyst for IBFX, provides her personal daily trading tips and insights through Dailyforextradingedge.com. An experienced trader with over fifteen years in the markets, Raghee is the co-founder of EZ2Trade Software and has taught her brand of technical analysis and charting strategies to students all over the world. She is an international author and has taught currencies, futures, and equities trading for over a decade.
It would be easy to take the euro sell-off today out of context of the dominant psychology of the EUR/USD or even EUR/JPY. Looking at both the daily charts of these pairs, it’s easy to see that neither has a trending Directional Bias, notably the chop on the EUR/USD. Regardless of the fundamentals, the technicals were pointing to exhaustion and a possible sell-off. Let’s take a look at the clues and where the pair will go from here.
The Draghi-fueled euro sell-off came as the confirmation of the slowdown in Europe and continuing struggles were echoed by the ECB President and no one likes hearing bad news. The bleaker outlook overshadowed the expected 25 basis point cut which is now seen as a band-aid rather than stimulus.
Past performance is not indicative of future results
The EUR/USD sell-off may be the focus but the move lower must be taken within the context of the choppy, sideways range it is trading within. Notice the GRaB candles have been mainly red but there are just enough blue (neutral) candles to keep the 34EMA Wave from taking on a “four to six o’clock” angle.
Past performance is not indicative of future results
The current 34EMA Wave angle is “two to four o’clock” and this means that the daily is congesting which opens to door to patterns like a triangle. Depending upon the EUR/USD’s next daily candle, there is a possibility that the pair is squeezing into an asymmetrical (ascending) triangle pattern.
The break of the 1.2400 major psychological level ushered in the fairly predictable run lower to the 1.2380 minor psychological level. The support that the slight wick below today’s candle is poised to leave appears to be the exhaustion at the other end of the range. While the downside is the path of least resistance, the euro has been incredibly resilient and short sellers getting active below 1.2300 have already been burned. Considering this, it would be prudent to lighten the load on a short position and aggressive traders could even consider getting slightly bullish near previous lows (support).
Past performance is not indicative of future results
Don’t look at the downtrend line break as a momentum trigger. While the triangle’s downtrend like was broken, the underlying market trend is not appropriate for a momentum entry, but rather a distribution fade that would view today’s move as exhaustive.
Interestingly the U.S. Dollar Index is exhausting right at the downtrend like of a triangle of its own on the daily chart. The “two to four o’clock” angle of the daily suggests that the environment is NOT right for a momentum breakout through the downtrend line resistance that has been pierced today but rather exhaustion.
As an active forex trader and Chief Currency Analyst for InterbankFX.com I do write for a number of sites all over the web and I am happy to say that I will be posting updates at www.IBFXconnect.com. My Activity Board will feature the trades from my trading account as well as intraday commentary.
Start the discussion! Questions? Comments. Leave it here at the Daily Forex Trading Edge for Raghee to personally answer. Using the icons at the top of the article to forward this update to a friend via email, post it on Google or Facebook or simply print it out for reading later.
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.
Raghee Horner