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EUR/USD Technical Analysis: Long-Term Down Trend in the Balance

EUR/USD Technical Analysis: Long-Term Down Trend in the Balance

2018-04-18 07:00:00
Ilya Spivak, Sr. Currency Strategist
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EUR/USD Technical Strategy: SHORT AT 1.2407

  • Euro hovering at decade-old down trend resistance barrier
  • Medium-term positioning hints at possible upside breakout
  • Holding short until confirmation seems tactically prudent

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The Euro is struggling to find lasting direction against the US Dollar but longer-term positioning continues to argue for a broadly bearish trend bias. Still, the medium-term view carries bullish elements that may yet carry potent supportive implications.

On the monthly chart, prices are perched squarely at the top of a falling trend channel defining the way lower for nearly a decade. A cluster of critical swing lows that served as support from 2008 to 2012 before finally being broken in 2014 has been recast as resistance, reinforcing the barrier capping gains.

Euro vs US Dollar monthly chart

A more appropriate place for the beginning of a major bearish reversal seems difficult to imagine. Yet, a look at the daily chart reveals a well-defined Triangle pattern following an upswing from November 2017 lows. The setup typically precedes continuation, hinting an upside breakout might be in the works.

Most interestingly, the resolution of the Triangle in an upside break might pave the way for a breach of the long-term trend resistance cluster. That has scope to open the door for a truly tectonic change in the Euro’s dominant trajectory that may define its path for years to come.

EUR/USD Technical Analysis: Long-Term Down Trend in the Balance

From a tactical perspective, opting to keep in play the second half of a short EUR/USD trade from 1.2407 seems prudent after partial profit was booked on hitting the trade’s first objective. Confirmation of the Triangle on a close above 1.2448 would also invalidate the position’s underlying logic, triggering a stop-loss.

In the meantime, the series of lower highs set from the double top below the 1.26 figure continues to hold and risk/reward parameters suggest there is room to wait and see if the weight of the long-term down trend will prevail. If it does, scale-up opportunities will be actively pursued.

EUR/USD TRADING RESOURCES

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

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