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EUR/USD Technical Analysis: Aiming Below 1.12 Figure

EUR/USD Technical Analysis: Aiming Below 1.12 Figure

Ilya Spivak, Head Strategist, APAC

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Talking Points:

  • EUR/USD Technical Strategy: Flat
  • Euro Drops for Third Day, Aims at Push Below 1.12 Figure
  • Risk/reward Parameters Argue Against Taking Short Trade

The Euro declined for a third consecutive day against the US Dollar, with prices now aiming at support below the 1.12 figure. A daily close below the 61.8% Fibonacci retracement at 1.1153 exposes the next downside barrier at 1.1021, the 76.4% level. Alternatively, a move back above the 50% Fib at 1.1260 targets the 38.2% retracement at 1.1367.

Our long-term bias on the Euro favors weakness. Indeed, the dominant trend has favored the downside since mid-2008. The currently available trading range – the distance between immediate support and resistance – is only 107 pips however. That is smaller than 20-day ATR (143 pips for the last closed candle), which skews risk/reward parameters away from entering a short trade. In short, even a short trade taken directly at resistance would be aiming for a profit target smaller than a “normal” worst-case scenario of a full-ATR move against the position. As such, we will opt to stand aside for now and wait for a more compelling opportunity to present itself.

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

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