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EURUSD Retests 1.1450 Breakout Level

EURUSD Retests 1.1450 Breakout Level

Jeremy Wagner, CEWA-M, Head of Education

Yesterday’s pivot high in the EUR/USD occurred at a strong confluence of wave relationships. When analyzing through the glass of Elliott Wave Theory, it appears the move higher is incomplete. Therefore, we look to identify key levels of support which would generate positive risk to reward ratios.

Bullish in the 1.1350-1.1450 zone.

Stop loss no greater than 100 pips.

Target the 1.17-1.18 zone.

Yesterday, we identified 1.1450 as the top of a price zone that would be an interesting price juncture for a bullish pivot. It represents the former breakout zone above the May 15 high and the June 18 high, plus it includes wave measurements as well.

(Click here to view the EURUSD chart with Elliott Wave labels identified.)

We think the current sell off represents a small wave ‘iv’ and therefore, prices should comfortably remain above Aug 12 high of 1.1215. Bleeding down below 1.1450 is ok with this wave picture and the discomfort in analysis wouldn’t begin until we test 1.1350. Therefore, look for a meaningful pivot in the 1.1350-1.1450 price zone.

Targets lie in the 1.17-1.18 handle depending on where wave ‘iv’ terminates. Therefore, look for bullish candle reversal patterns or positive divergence in an oscillator to suggest a bottom is forming and we’ll want a stop loss no greater than 100 pips. This should yield a better than 1:2 risk to reward ratio.

The EURUSD SSI reading has been interesting over the past 48 hours of trading. We saw the SSI figure crater to -3 and soften a bit to -2.6 as prices jumped higher yesterday. As the EURUSD has continued to fall, SSI has moved to the current reading of -2.1.

If the SSI begins to shift towards more sellers, then that could also indicate a near term bottom is close at hand.

On a side note, if we do see EURUSD bump higher and retest the highs, then that likely coincides with another sell off in US stocks. Here are some levels I’m watching in the S&P500.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.