Weekly Close: 1.1621
Although the EUR/USD squeezed out a gain last week, demand for the single currency diminished as the unit shook hands with the underside of a notable coming in at 1.1717-1.1862. Capping upside in the months of May, June and July of this year, this area certainly has potential! The next downside target on this scale falls in around demand drawn from 1.1312-1.1445.
From this side of the spectrum, traders witnessed a sharp downside correction just south of a prominent at 1.1723 on Friday. Not only did this move engulf Thursday’s gains, it positioned the couple back within striking distance of demand printed at 1.1530-1.1600. Whether this demand has any juice left is difficult to judge, as it was violated by a couple of pips at the beginning of last week.
A quick recap of Friday’s movement on the H4 scale shows the pair whipsawed through 1.17 to highs of 1.1721, and aggressively turned lower. The catalyst behind the move south appears to be at the hands of US President Trump who reportedly stated he wants $200bln in China tariffs, despite on-going trade talks.
The day ended penciling in a full-bodied candle within the walls of a demand seen at 1.1609-1.1632. While this area is considered the ‘decision point’ to break above 1.17, and, therefore, relatively strong from a technical standpoint, the market may want to bring in 1.16. Aside from this number being watched by many, it is shadowed closely by September’s opening level at 1.1595, a 61.8% Fib support at 1.1599 and also represents the top edge of the daily demand mentioned above at 1.1530-1.1600.
Areas of consideration:
Longer term, there’s a chance the pair could eventually stretch as far south as weekly demand highlighted above at 1.1312-1.1445.
Intraday/medium term, however, we see the 1.16 handle on the H4 timeframe, along with the connecting daily at 1.1530-1.1600, possibly hindering downside this week. 1.16, in fact, is particularly interesting for a bounce higher today, in view of its local confluence. In addition to this, the stop-loss orders from those long from the current H4 demand and those looking to sell the breakout of this area will likely provide liquidity for pro money to buy (stops from buyers are sell orders).
Therefore, keep eyes on 1.16 today for signs of intent. A nice-looking formation produced from this neighborhood is likely to deliver some upside, targeting July’s opening at 1.1675 as the initial port of call. Remember, though, never forget where we are coming from on the – constant monitoring of any long trade is recommended.
Today’s data points: EUR final CPI y/y; US empire state manufacturing index.