EUR/USD Talking Points:
- The Euro has been consolidating versus its US counterpart after bottoming in late-May
- A dovish ECB and a stronger USD has brought Euro closer to downtrend resumption
- Support is at 1.1507 followed by 1.1400. Resistance is at 1.1718 followed by 1.1852
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The Euro has been struggling to find direction against its US counterpart since June began. Its consolidation followed an aggressive downtrend that took place through late-April and May in which it fell below a long-term rising trend line from April 2017. Along the way, bullish reversal patterns came and went but they lacked follow-through. Notable examples were a morning star in early May and a bullish engulfing at the end of it.
Interestingly, options-derived support and resistance levels during its consolidation kept EUR/USD tamed as it was unable to push outside the outer boundaries. The most recent European central bank interest rate announcement on June 14thsent the pair tumbling the most in a single day since October 2015. From here, the Euro is facing a potential point that could lead to a resumption of its downtrend.
Looking at the daily chart below, EUR/USD remains just above the current 2018 lows set in late-May. Coincidentally, this area also closely aligns with the 38.2% Fibonacci extension level at 1.1507. The pair also recently tested this horizontal support on June 21st but failed to achieve a breakout. Meanwhile, the lows set back in November and December 2017 around 1.1718 have been acting as former support now resistance.
A push below immediate support opens the door for EUR/USD to resume its downtrend. In fact, such an outcome further jeopardizes its ascent in 2017 and the long-term outlook could turn even more bearish. Such a case places the 50% midpoint of the extension as the first target at 1.1400. On the other hand, a climb above immediate resistance exposes the June 14th high at 1.1852.
EUR/USD Trading Resources:
- Join a free Q&A webinar and have your trading questions answered
- Having trouble with your strategy? Here’s the #1 mistake that traders make
- See our free guide to learn what are the long-term forces driving Euro prices
- See how the Euro is viewed by the trading community at the DailyFX Sentiment Page
--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter