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Bearish Toward YTD Lows

Bearish Toward YTD Lows

Tyler Yell, CMT, Currency Strategist


Bias: Bearish Toward YTD Lows

Point to Establish Short Exposure: Daily Close < 1.0819 May 27 Low

Invalidation Level: 1.0955 Weekly Pivot

Target: 1.0457 YTD Low

The Euro continues to be sold in an unconvincing manner as the USD takes the top spot across G10FX. Focus is currently on the downside though the 1.0819 barrier, May 27 Low, hasn’t given up easily. Should that level break, along with a continued rush into the USD on supposed Hawkish Fed Action, EURUSD could look to test YTD Los.

From an Elliott Wave perspective, a break below the May 27th at 1.019 could be the first validation of a resumption of the impulsive decline from summer 2014. If that’s the case, a key technical target takes us below the YTD low toward 1.0250. Another interpretation is known as a flat correction, which we could be in the middle. A flat correction could similarly look to test YTD lows though a more aggressive bounce is expected in the ~1.0460 area so risk should be kept tight.

Key EUR/USD Levels:

* 3rd resistance: 1.1006 100-DMA

* 2nd resistance: 1.0955 June 29 low / Weekly Pivot

* 1st resistance: 1.0916 July 7 low

* Spot: 1.0841

* 1st support: 1.0819 May 27 low

* 2nd support: 1.0660 April 21 low

* 3rd support: 1.0457 March 13 / YTD low

From a volume perspective, the sideways move from the March 13th low is attracting considerably less volume than in the months prior. Sideways prices often see diminishing volume, the focus often turns to a volume breakout that aligns with price. A closing move below the May 27th low on high volume would likely give traders the confidence of a continuation move worth trading. From a Fibonacci point of view, the counter-trend move from March 16th to May 15th met a 1.618 extension target at 1.1482, which could also signal a corrective target may have been met and the move lower could resume on the mentioned technical break.

EURUSD Sideways Move Feeling Pressure of TL Resistance

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