EUR/USD Technical Strategy: NET SHORT AT 1.2276
- Euro chart positioning hints bounce may precede deeper losses
- Rebound will be treated as an opportunity to add to short trade
- Support now just below 1.14, with break exposing 1.12 figure
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The Euro might manage a near-term bounce against the US Dollar before returning to the long-term down trend revived Turkish crisis spillover fears. The four-hour chart reveals early signs of positive RSI divergence. This hints at ebbing downside momentum even as the pair sets new 13-month lows, which may precede a corrective bounce before the dominant bearish bias reasserts itself.
Turning to the daily chart, the expected bearish breakdown from a Triangle chart formation has broadly exposed the 50% Fibonacci expansion at 1.1329. A daily close below that opens the door for a challenge of the 61.8% level at 1.1206. Alternatively, a turn back above the 38.2% Fibat 1.1452 paves the way for a retest of support-turned-resistance in the 1.1527-77 area.
The EUR/USD short position activated at 1.2407 and then scaled up near 1.19 remains in play. A corrective bounce from here and subsequent signs of topping and/or upside exhaustion will monitored closely for opportunities to increase exposure further. In the meantime, opting for a wait-and-see approach appears to be most sensible.
EUR/USD TRADING RESOURCES
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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