Bullish EUR/USD Holding Confluent Support
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This setup looks to take advantage of the bigger-picture trend in the Euro while the U.S. Dollar remains in a rather precarious position. While the Dollar has been showing signs of strength since early-September, the bigger-picture down-trend remains in-tact, and with a decent slate of U.S. drivers coming-out this week, the potential for volatility remains high. We discussed the U.S. Dollar in considerable depth in this morning’s Market Talk, and we previously looked at a big batch of support that’s held the higher-low in EUR/USD, even during a rather climactic Non-Farm Payrolls release.
While the Dollar has been driving-lower for much of 2017, the Euro has been rallying. When meshed together in EUR/USD, we can see a pair surging from a low below 1.0400 to start the year, to above the vaulted psychological level of 1.2000 just last month. But since running into that level at 1.2000, bulls started to get shy, and the pair finally put in some form of retracement after the breakneck pace of gains in the five months prior.
We’ve been following a key zone of support in EUR/USD that runs from 1.1685-1.1736. Also of interest is the 23.6% retracement of the 2017 bullish move that shows at 1.1679, which had helped to set the low last week. This opens the door for bullish setups, and traders can look to place stops on the position either a) underneath the confluent batch of support and below the August low at 1.1662 or b) below the previous swing-low at 1.1612 to give the position a bit more room to work.
Top-side targets can be set to 1.1833 (break-even stop move), followed by 1.1900, 1.2000 and then 1.2085.
Chart prepared by James Stanley
--- Written by James Stanley, Strategist for DailyFX.com
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