EUR/USD Technical Analysis: Double Top in Place Below 1.26

EUR/USD Technical Strategy: PENDING SHORT AT 1.2277

• Euro drops through neckline support, hinting double top is set below 1.26
• Selloff followed soft German CPI, hawkish comments from Fed’s Powell
• Looking to sell on a corrective bounce for better risk/reward parameters

The Euro looks set to suffer deeper losses against the US Dollar after prices established a double top below the 1.26 figure, capping a four-month uptrend. The single currency punctured neckline support after following disappointing German inflation data and hawkish comments from Fed Chair Jerome Powell.

From here, a daily close below the 38.2% Fibonacci retracement at 1.2173 opens the door for a test of the 1.2055-70 area (August 29 high, 50% level). Alternatively, move back above neckline support-turned-resistance, now at 1.2277, opens the door a retest of former trend line support at 1.2385.

Prices are a touch too close to support to make for an attractive short trade setup from a risk/reward perspective. With that in mind, an order has been set to sell EUR/USD at 1.2277. If triggered, the position will initially target 1.2173 and carry a stop-loss activated on a daily close above 1.2329.

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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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