Talking Points
- Important timing relationship coming up in the euro
- Support between 1.2700 and 1.2585 looks critical
Unfamiliar with Gann Square Root Relationships? Learn more about them HERE.
The last few days of the 3rd quarter are shaping up to be quite important for EUR/USD. An alignment of different cycles (some extending as far back as 2000) point to a potential reversal. However, we are a little “gun shy” given the exchange rate had a similar set up heading into the important cyclical window around the start of the month. In that episode the trend accelerated lower rather than reverse. Factors favoring a reversal here are sentiment which remains near multi-year extremes on the DSI as the 1-week moving average is at just 7% bulls. Such low levels of bullishness in the past have to led to strong counter-trend recoveries. EUR/USD can also now be deemed “oversold” as the exchange rate fell to the 3rd standard deviation of the 1-year standard channel on Thursday. Historically this has been a good barometer of an oversold market and like DSI is a development that is often seen around turning points. Volume figures, on the other hand, have begun to turn up again and perhaps more importantly the glaring divergence on the daily has been closed which suggests the trend remains strong. Key levels to monitor for a reaction over the next days are 1.2700, 1.2645 and 1.2585.
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EUR/USD Daily Chart: September 26, 2014
Charts Created using Marketscope – Prepared by Kristian Kerr
Key Event Risk in the Week Ahead:
LEVELS TO WATCH
Resistance: 1.2700 (Gann), 1.2585 (Gann)
Support: 1.2810 (Gann), 1.2905 (Fibonacci)
Strategy: Buy EUR/USD mid-week
Entry: Buy EUR/USD on Tuesday’s close if above 1.2585
Stop: 1-day close below 1.2585
Target: 1.3000
--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter at@KKerrFX.
