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EUR/USD Jumps to Trend Line Resistance After Weak Retail Sales

EUR/USD Jumps to Trend Line Resistance After Weak Retail Sales

Jeremy Wagner, CEWA-M, Head of Education

Talking Points

  • EUR/USD trades to the top of its trend channel near 1.1240
  • Elliott wave counts are mixed with this resistance line being the key level
  • Use SSI with GSI to see how the intraday momentum is shifting near the resistance line

EUR/USD has popped higher on today’s weaker than expected retail sales release. The aftermath of the move resulted in EUR/USD bumping up to 1.1222.

Today’s high came in near an interesting juncture. If we connect a trend line from the May high to the June high, that trend line crosses near 1.1240. Today’s high came close to touching this trend line.

This trend line is an important line from a technical perspective. Zooming out, we have a potential zig zag equal wave pattern from May 3 to June 23. The zigzag is a versatile Elliott wave pattern that shows up in many different places of the Elliott wave sequence. That pattern by itself suggests we may see higher prices on EUR/USD towards 1.14.

EUR/USD Short Term Bullish Break?

Chart prepared by Jeremy Wagner

However, there is another possibility that is quite bearish. The extremely bearish scenario suggests the market is unfolding a series of 1-2 waves meaning wave iii of 3 is about to begin (see image below). Under this scenario, the trend line connecting the May and June highs is important. If price materially pushes above this trend line, then the extremely bearish scenario moves off the table as a viable option.

If price holds below this trend line, then we need to be aware of an extremely bearish scenario that may unfold.

EUR/USD Extremely Bearish Scenario

Chart prepared by Jeremy Wagner

A couple of tools we can follow to help us determine if the trend line will hold or not is GSI and SSI.

A trader, therefore, can pull the Grid Sight Index (GSI) out of their tool box to see what the intraday momentum is looking like near this 1.1240 trend line. I would suggest looking at it on the ‘m5’ and ‘m10’ setting.

Learn more about Grid Sight here.

Additionally, look at how sentiment as measured through SSI is responding to that level. Currently, SSI is sporting a -1.69 figure which means there are more traders short than long. If this begins to shift higher, while GSI shows intraday reverals, then you have confirmation that the trend line likely holds over the near term. If SSI shifts lower while GSI intraday momentum looks higher, then the trader can shift to a breakout strategy higher.

See EUR/USD trader positioning here.

Biggest reason EUR/USD traders lose? This could be why.

Interested in a quarterly outlook for EUR or USD? Download our quarterly forecast here.

---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU

Follow me on Twitter at @JWagnerFXTrader .

See Jeremy’s recent articles at his Bio Page.

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