ICmarkets

The week ahead on the Euro

FX:EURUSD   Euro / U.S. Dollar
297 0 4
Weekly view: Last week’s action saw the Euro             rally a cool 330 pips from open (1.0859) to close (1.1192). This move consequently saw price close above the weekly swap level seen at 1.1096, and at the same time, ‘touch gloves’ with a major weekly supply zone coming in at 1.1449-1.1278. This has been the most we’ve seen the Euro             rally since price began its descent back in May 2014. In spite of this, our long-term bias still remains south and will continue to do so until we see a convincing push above the aforementioned weekly supply area.

Daily view: The daily timeframe shows some very interesting price action. The Euro             broke above a daily supply area seen at 1.1244-1.1158. This move likely triggered buy stops from traders not only attempting to fade this area, but also from those looking to buy the breakout, and thus potentially setting the stage for further upside this week. However, before a rally takes place, we should expect profit taking to hit this pair which will likely force prices to sell off down to the aforementioned weekly swap level, or even the daily swap area seen below it at 1.1051-1.0918. Once/if price should rally this week, there’s a ton of resistance for the buyers to contend with – we have a clear Harmonic Bat pattern reversal zone coming in at 1.1516/1.1376, and a converging daily Quasimodo resistance line seen at 1.1421. Furthermore, let’s not forget that these resistances are located deep within the aforementioned weekly supply area making it one very strong and robust area to watch out for this week!

4hr view: Friday’s sessions saw the EUR/USD             pair aggressively sell off from the 4hr swap level 1.1280, consequently forcing prices to attack and close below the 1.1200 number to end the week.

Assuming that the sellers can hold the market below 1.1200 today, this could very well encourage further sellers to join in and push this market south towards the weekly swap level/round number area 1.1096/1.1100. The reason for believing price could drop this far is simply because of the strong buying tail seen marked with a black arrow at 1.1114. This tail likely consumed a ton of buyers when it spiked lower to fill unfilled buy orders, thus any sell off seen in this vicinity should not have much supportive pressure to deal with until reaching the 1.1100/1.1096 area. Therefore, our first port of call today will be to watch for lower timeframe selling pressure around 1.1200, should a sell signal be seen, we’ll look to short this pair down to around the 1.1110 mark. In the event this goes to plan, we intend to close our existing short positions here and begin looking for longs around 1.1100/1.1096 area – the move from this zone could be aggressive as let’s not forget that we’re dealing with the weekly swap level 1.1096 here, so be prepared! Take-profit targets for any longs from this area will be dependent on how price approaches the zone.

Our current buy/sell orders:

• Buy orders: 1.1100/1.1096 (Predicative stop-loss orders seen at: dependent on where one confirms this level).

• Sell orders: 1.1200 (Predicative stop-loss orders seen at: dependent on where one confirms this level).


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