EUR/USD – Shaken, Not Stirred
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- EUR/USD breaks lower from week-long consolidation
- 1.1220/50 zone now key pivot
I say it a lot, but markets can be quite perverse. The near two week-long consolidation in the euro above the February highs had the market bulled up and looking for another leg higher. I think I counted 6 emails in my inbox with ideas on “how to play further euro upside”. We got precisely the opposite with a sharp break lower from that consolidation this morning. I don’t know if this is the start of something more important to the downside or just a minor “shake of the tree” before heading higher, but there are a couple of zones that I will be watching very closely over the next few sessions for clues.
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On the topside, the breakdown point comes in around 1.1360/70. If the exchange rate can stabilize around current levels and get convincingly back above this zone then we can talk a lot more seriously about a resumption move higher and an extension to at least test the long-term symmetry around 1.1600. If this turns into resistance, however, then the euro is probably in some trouble - especially if it is followed by a break under 1.1220/50. This zone marks a relatively tight convergence of the 38% retracement of the move off the early March low, the 23.6% retracement of the December – April advance and two square root relationships from the YTD high. If the intermediate-term uptrend is still comfortably driving things then this area needs to hold.
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--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.