Nick Nasad
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EUR/USD: Key Junction as Threat of Further Retrace Looms

The EUR/USD is at a key juncture in the 4-hour chart. For 2 and a 1/2 weeks we've had a nice upward sloping trendline, which the pair respected. Today, we see the trendline failed to hold, as the EUR is weaker generally.

  • The EUR/USD is at a key juncture in the 4-hour chart.
  • For 2 and a 1/2 weeks it has respected a nice upward sloping trendline.
  • Today, the trendline failed to hold, as the EUR is weaker generally.
  • This begs the question, is it time for a further retrace of the recent up-swing?

Retrace Scenario: The USD has been pairing some of its extreme losses since putting in a high at 1.3565 following the FOMC decision last week. The question is, was the post-FOMC a "buy the rumer, sell the news" reaction, with the USD weakening before hand, but now strengthening in the aftermath? 

  • If yes, the key next test will come at 1.3450 area, which is both a horizontal pivot from August 18th, as well as where the 55-EMA is currently.
  • A break through that support level will open up the 1.34 handle, and then the 200-MA's below (1.3330 for SMA, 1.3340 for EMA).
  • This would also conform to a mean-reversion if we remain in a broader uptrend, but need some pullback before the next upward leg.  
  • Therefore, the retrace here can still come with a longer term bullish posture for this pair. 

Bullish Case:  For the shorter-term bullish case, the supports at the recent lows at 1.3460 and the key level we described above (the 55-EMA/pivot) should act as support and a springboard for further gains. The resistance up above are a) the downward sloping resistance trendline, b) horizontal pivot at 1.3547 and c) the previous post-FOMC high (1.3565). 


Here's the EUR/USD in the 4-Hour:

(Click on the image and press the right arrow button to see the latest price action)


- Nick