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EURUSD Risks Correction Into August Open- 1.3372 Key Ahead of ECB

EURUSD Risks Correction Into August Open- 1.3372 Key Ahead of ECB

2014-08-04 18:28:00
Michael Boutros, Strategist
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Talking Points

  • EURUSD at risk for near-term reversal heading into August open
  • Key support / July Low / August ORL at 1.3372/93
  • Major Event risk on tap this week

EURUSD Daily Chart

EURUSD Risks Correction Into August Open- 1.3372 Key Ahead of ECB

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

  • EURUSD holding key support zone 1.3372/93- bullish invalidation
  • Breach above last week’s range highs risks near-term correction
  • Resistance 1.3448, 1.3476, 1.3518/32- bearish invalidation
  • Support-break targets objectives at 1.3323, 1.3294, 1.3205/25
  • Daily RSI resistance trigger pending- bullish
  • Event Risk Ahead- Eurozone Retail Sales tomorrow and ECB Rate Decision on Thursday

EURUSD 30min Chart

EURUSD Risks Correction Into August Open- 1.3372 Key Ahead of ECB

Notes: Since our last EURUSD update published in early July, the pair has taken out all of our scalp targets before rebounding off more significant technical support at 1.3372 (break target 4 of that report). The focus now shifts to the August open with Friday’s range taking shape between well-defined Fibonacci confluences. While we cannot rule another test of the lows here, the pair does look vulnerable for a near-term correction off this key support structure and a break/close above 1.3448 will shift our scalp bias to the topside heading into the start of August trade.

Keep in mind that the broader down-trend is still in play here and ultimately we are looking for this rally to offer more favorable short entries. Bottom line: we’ll look for a break of the weekly opening range to offer conviction on our near-term bias while noting a greater willingness to buy dips while above 1.3372. A break/close below this threshold invalidates the bias with such a scenario putting subsequent support objectives into view. A rally into 1.3518/32 begins to draw more short interest and we’ll keep our eye on the broader descending trendline off the May high.

The average true range has remained rather tight here so in light of the upcoming event risk and improved volatility expectations we’ll up the profit targets to 38.2% of the daily ATR- this puts us at about 17pips per scalp. Note that caution is warranted heading into the European Central Bank policy decision and subsequent press conference with President Mario Draghi as the events are likely to fuel added volatility on euro crosses. Follow the progress of this trade setup and more throughout the trading week with DailyFX on Demand.

* It’s extremely important to give added consideration regarding the timing of intra-day scalps with the opening ranges on a session & hourly basis offering further clarity on intra-day biases.

Key Threshold Grid

Entry/Exit Targets

Timeframe

Level

Technical Relevance

Bearish Invalidation

Daily / 30min

1.3443/48

78.6%Retrace / 1.618% Ext / Last Week’s ORH

Break Target 1

Daily / 30min

1.3476

February Low

Break Target 2

Daily / 30min

1.3518/32

June Close Low / 50% & 38.2% Retrace(s)

Break Target 3

30min

1.3548

7/21 Swing High / Soft Resistance

Break Target 4

Daily / 30min

1.3572

61.8% Retracement / 61.8% Ext

Break Target 5

30min

1.3608

38.2% Retracement

Bullish Invalidation

Daily / 30min

1.3373/96

50% Retrace / 61.8% Ext / August ORL

Break Target 1

30min

1.3345

Soft Support / Pivot

Break Target 2

Daily / 30min

1.3323

2.618% Extension

Break Target 3

Daily / 30min

1.3294

November Low

Break Target 4

Daily / 30min

1.3208/27

61.8% Retracement / 100% Extension

Average True Range

Daily (20)

43

Profit Targets 17-19pips

*ORH: Opening Range High

*ORL: Opening Range Low

Other Setups in Play:

---Written by Michael Boutros, Currency Strategist with DailyFX

For updates on this scalp and more setups follow him on Twitter @MBForex

To contact Michael email mboutros@dailyfx.com or Click Here to be added to his email distribution list

Join Michael for Live Scalping Webinars this week Tuesday – Thursday on DailyFX Plus (Exclusive of Live Clients) at 15:30 GMT (11:30ET)

Interested in learning about Fibonacci? Watch this Video

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