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A Lot of Euro Technical Moves but Lacking Conviction

A Lot of Euro Technical Moves but Lacking Conviction

John Kicklighter, Chief Strategist

Another wave of tempting technical breaks have flushed through my charts, this time on behalf of the Euro bears. However, the technical push doesn't garner the same kind of conviction from the fundamentals and market conditions. First and foremost, the backdrop for market activity is one of range. It is very difficult to jump start new trends - particularly ones that fight large, mature trends.

That said, the euro does have factors that could weigh it fundamentally - moving outside somewhat outside of the circle of the risk that is anchoring broader capital markets. Those are medium-term drivers though that are not generating a lot of kinetic energy.

I already have my toe in the 'euro short' with my EURJPY position (short at 137.20 and a 150 pip stop). WIth the recent push, EURUSD has tripped a level I have bene watching for some time as continuation of a trend that I have traded successfully twice. My concern with momentum is leading me to place a short entry order - just overnight in case I cannot make the decision while monitoring it - at 1.3500 flat and a stop of 90 pips.

There are other Euro trades that I like, but I don't think it is wise to build up such a heavy position when I'm not convinced of momentum. As such, I will not jump back into my EURAUD short that served me well the past three months.

For existing positions, my long-term USDCHF long trade is benefitting from the Euro's slide as the franc takes much of its guidance from its Eurozone trade partner. AUDNZD - which I am also long for a long-term position - is also up on the day after the firm inflation figure.

Other trades opportunities that I am watching include GBPUSD which is facing an inevitable, short-term breakout. I would prefer to see a bearish move below 1.7000 that is encoruaged by a neutral/dovish developments on the UK newswires (a very important aspect). And, keeping a wary eye on risk, I am also watching USDJPY should it move in on 100 which would certainly trigger on a big risk-off move.

Market conditions change, and our strategy should reflect those changes. We have coded the DailyFX-Plus strategies for Breakout, Range and Momentum to adapt to these market shifts.

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