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EUR/USD Offers Attractive Risk: Reward Toward Recent Range Low

EUR/USD Offers Attractive Risk: Reward Toward Recent Range Low

2015-10-14 17:27:00
Tyler Yell, CMT, Currency Strategist
Share:

Point to Establish Short Exposure: Close below 1.1375 (Hrly Ichimoku Cloud Support)

Target 1:1.1318 Oct. 2nd High

Target 2:1.1211 Oct. 7thCorrective low

Invalidation Level:Daily Close > 1.1460

The US Dollar seemingly is without a bid. Currently, we sit on the 200-dma, and a break seems all but certain. However, should a bid arrive and the dollar bounce, EUR/USD seems to be at a worthy technical juncture to consider a retracement trade. After August 24th, it appears we have been trading in a ~375 pip range on EUR/USD from ~1.1075-1.1450. What makes the current set-up interesting (once Ichimoku gives the trigger), is that we’re near the top of the range making for an attractive set up from a Risk: Reward perspective should USD bounce.

EUR currently is attracting a bid due to haven flows. However, if that demand wanes for whatever reason the stars dictate, and the price remains below key Fibonacci resistance on the close of 1.1475/60, a retracement toward range lows could be in the works. This trade is looking to take advantage of such a development.

Technical Focus:

Ichimoku does a rare job well in encouraging traders to wait confirmation. While the move higher is obvious, so is the support we’re running into on the chart. Most notably, the May 15th high as well as a handful of Fibonacci targets. A move below the hourly Ichimoku cloud (added to the chart below) would signal downside momentum towards our targets near the 1.1318& 1.12114 targets mentioned above.

Chart:

EUR/USD Offers Attractive Risk: Reward Toward Recent Range Low

Chart Courtesy of FXCM Marketscope 2.0

Technical Levels:

EUR/USD -- Remains susceptible to 55-wk MA test at 1.1473

2nd resistance: 1.1473 55-wk MA

1st resistance: 1.1460 Sept. 18 high

Spot: 1.1437

1st support: 1.1372HrlyIchimoku Cloud Support (Trigger)

2nd support: 1.1211Corrective Low Before Recent Push Higher

Volume:

EUR/USD Offers Attractive Risk: Reward Toward Recent Range Low

EURUSD has consistently found resistance in the current zone around 1.1450. The exception was the spike on August 24th that quickly retraced. Should the resistance hold again, a move toward the support levels mentioned above would be in focus.

Sentiment:

Long positions are 9.7% lower than yesterday and 7.3% above levels seen last week. Short positions are 5.0% lower than yesterday and 7.3% below levels seen last week. Open interest is 7.1% lower than yesterday and 7.4% below its monthly average. While these levels do not provide a current signal, it does show the recent move higher is attracting less attention. A turn lower would catch the shorts by surprise as they’ve stopped fighting the move. We use our SSI as a contrarian indicator to price action.

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