EUR/USD - Summer Squeeze?

Talking Points

• EUR/USD breaks above key moving average
• Fibonacci resistance holds

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The price action this week in EUR/USD has us questioning whether this is just another “run of the mill” short squeeze? We say this primarily because the euro did manage to gain some traction above the 50-day moving average. Previous rally attempts over the past month all failed right around this level. The fact that the moving average also turned into support yesterday could be taken as another bullish change in behavior. We would be remiss if we didn’t also mention the month-long inverse head & shoulders pattern that was triggered on the move through 1.1070. If a reversal pattern is indeed ongoing then it would argue for an eventual move in spot back towards the May high. Somewhat fittingly the euro has since stalled out right at the 61.8% retracement of the range of the past three months near 1.1200 (which interestingly enough is also the 61.8% retracement of the all-time traded low and high in the single currency). This is an important technical barrier and if it is easily overcome (especially on a weekly closing basis) it will be a lot harder to dismiss the recovery as just another routine summer squeeze.

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EUR/USD Daily Chart: August 14, 2015

ChartPrepared by Kristian Kerr

LEVELS TO WATCH

Resistance: 1.1215 (Fibonacci), 1.1320 (Fibonacci)

Support: 1.1090 (50-day MA), 1.1055 (Fibonacci)

Strategy: Buy a weekly close above 1.1210

Entry: Buy EUR/USD only if it manages a weekly close above 1.1215

Stop: Daily close below 1.1090

Target: Open

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter at@KKerrFX.