News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Real Time News
  • So much for that Evergrande recovery. Shares of the troubled Chinese property developer are down approximately -12% today following yesterday's impressive rally (biggest in a year) https://t.co/Nome25d9Bt
  • Retail trading platform Robinhood announces hire of new Chief Compliance Officer amid regulatory scrutiny
  • There is a ridiculous number of scheduled Fed speeches on the docket next week. Powell specifically will be speaking multiple times including at an ECB hosted forum on central banking (which also has a panel with Fed, ECB, BOE and BOJ heads)
  • USD Ascending Triangle, Bullish for Q4 - #DXY chart on @TradingView https://t.co/iCnRSo9N4V
  • Credit rating agency Standard & Poor's is due to give its sovereign credit rating update on Germany today ahead of weekend national elections
  • RT @BIS_org: Since the early 1990s, changes in the #MonetaryPolicy stance have affected a rather narrow set of prices – mostly in the servi…
  • Huawei's CFO Meng Wanzhou reached deal with the US Dept of Justice to return her to China - Dow Jones
  • Cleveland Fed President Loretta Mester says: - sees US GDP in 2022 between 3.75 and 4% - Supports tapering in November and concluding over the first half of 2022 - After liftoff, accommodative policy needed for some time
  • Fed Chairman Jerome Powell doesn't comment on the growth forecast or monetary policy in his introductory remarks
  • Kansas City Fed President Esther George says: - The labor market friction is fading barring a resurgence of virus - A 'normal' economy is likely to remain elusive for some time - Asset buying effects complicate the judging rate change plan
Bullish EUR/USD: Looking Strong Into 1.1415 Resistance

Bullish EUR/USD: Looking Strong Into 1.1415 Resistance

Tyler Yell, CMT, Currency Strategist

Point to Establish Long Exposure: Daily Close > 1.1415

Spot: 1.1315

Target 1:1.1712 August 24 High

Target 2:1.1998 2015 Closing High

Invalidation Level: Close Below 21-DMA: 1.1162

Last Thursday marked the first time in two years that EUR/USD closed above the 100-week moving average. Whether or not this technical development is the first fruits of a kick-off higher or now will likely be determined by the Jackson Hole Symposium where Janet Yellen will speak to the theme, "Designing Resilient Monetary Policy Frameworks for the Future."

From a fundamental point of view, one would think the US Dollar should soon strengthen. Interest Rates Probabilities per Bloomberg’s data show traders are now pricing in a rate hike. However, new discussions over the neutral rate”—the rate that signifies the dividing line between an accommodative and a restrictive monetary policy may complicate matters for Dollar Bulls.

Robert Kaplan, CEO & President of the Dallas Federal Reserve recently stated in Beijing that, “a major driver of the decline in the neutral rate is a decrease in estimates of future growth.” Mr. Kaplan also goes on to note that the other forces driving down the neutral rate, which has picked up steam as a driving force of the U.S. rate hike path, seem to be putting long-term pressure on inflation expectations.

Therefore, the technical picture that will be described in more detail below and the fundamental components may be aligning for EUR/USD strength in the coming weeks, much like we saw in late August in 2015:

Bullish EUR/USD: Looking Strong Into 1.1415 Resistance

Trade Setup:

Bullish EUR/USD: Looking Strong Into 1.1415 Resistance

The price chart above (D1 EUR/USD), shows an uptrend in EUR/USD albeit, a choppy one. Here you can see the benefit of buying dips and the peril of buying rips or breakouts. Some traders may prefer to be long here as opposed to a breakout > 1.1415. However, what’s unique about 1.1415 is that since January 2015, we’ve been unable to spend more than a week above this level. Therefore, if we can break higher and sustain that break, it would appear from a technical view to be the clearest precedent for a strong move to and through the August high (1.1712).

Given this environment, a trailing stop would be used above an opposing down-fractal on the daily chart so that the trade would align with a favorable risk: reward ratio that our Traits of Successful Traders report found to be one of the best things a trader can do to ensure long-term sustainability in your trading.

Sentiment:

Right now, our Trader Sentiment Indicator SSI continues to provide a bullish bias.The ratio of long to short positions in the EURUSD stands at -2.31 as 30% of traders are long. Yesterday the ratio was -2.59; 28% of open positions were long. Long positions are 6.7% higher than yesterday and 10.4% below levels seen last week. Short positions are 4.7% lower than yesterday and 33.3% above levels seen last week. Open interest is 1.5% lower than yesterday and 14.8% above its monthly average.

We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are short gives signal that the EURUSD may continue higher. The trading crowd has grown less net-short from yesterday but further short since last week. The combination of current sentiment and recent changes gives a further mixed trading bias.

Bullish EUR/USD: Looking Strong Into 1.1415 Resistance

Key Technical Levels:

EUR/USD – Awaiting A Break-Away Move Above 1.1415

2nd Resistance: 1.1415, June 9 High

1st Resistance:1.1365, August 18 High

Spot: 1.1315

1st support: 1.1162 21-DMA

2nd support: 1.1044 August 5, Low

Shorter-Term EUR/USD Technical Levels for Monday, August 22, 2016

For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours.

Bullish EUR/USD: Looking Strong Into 1.1415 Resistance

To receive Tyler’s analysis directly via email, please SIGN UP HERE

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

DISCLOSURES