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EUR/USD Holds Under August TL While EUR/AUD Readies in Triangle

EUR/USD Holds Under August TL While EUR/AUD Readies in Triangle

Christopher Vecchio, CFA,

Talking Points:

- EURUSD starting to treat moving average envelope as resistance.

- EURAUD may be consolidating in a bullish symmetrical triangle.

- See the September forex seasonality report.

The broader USDOLLAR Index is showing signs of stress after its recent run higher post-NFPs. On the H4 timeframe, a potential bearish key reversal or outside engulfing bar has formed, suggesting a near-term top may be looming. However, a breakdown of the components of the index reveal a different story: the move is completely driven by the jump in GBPUSD this morning; the US Dollar is the dominant currency in AUDUSD, EURUSD, and USDJPY this morning otherwise.

If EURUSD is set to resume its broader decline - bears seem to be in control at the moment, with price sustaining its break below the August 7, 19, and 30 trendline and now treating the daily 5-, 13-, 21-EMA envelope as resistance - it may not be a move that encompasses all EUR-crosses. Indeed, our fundamental outlook for this week doesn't see any reason for unison in the EUR-crosses either. Technically, our eyes are on EURAUD, which may be consolidating in yet another bullish setup during its ongoing rally from the April lows.

Despite the low liquidity conditions that are set to proliferate today thanks to both Canada and the United States on holiday for Labor (or Labour) Day, we wouldn't expect much attention to a pair like USDCAD. However, in light of recent moves in the energy complex and speculation building into the September 17 FOMC meeting, USDCAD may be this week's early dark horse for a big move: it's been consolidating in a triangle in context of the rising channel from mid-July; and a break higher from here would point to a move towards C$1.3450 in quick order.

See the above video for technical considerations in EURUSD, EURAUD, AUDUSD, USDCAD, and the USDOLLAR Index.

Read more: Euro Trades Choppy amid Falling Inflation and Central Bank Machinations

--- Written by Christopher Vecchio, Currency Strategist

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