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I wanted to share some recent analysis on where we feel the EURUSD may be heading, in hopes of sparking some discussion! Let’s hear what you have to say!
Indeed the EURO has displayed quite an impressive run kicked off by an American Summer rally boosting the pair 1200 points from the lows of early July 2013. However, murky waters lie ahead for the Fiber. Trading just under the 1.4 handle, the pair hasn’t seen the like since October 2011. Today, we breakdown where the EURO has been, and where we feel it may be heading. Caution: You may not like what you are about to read.
The EURUSD has spent very little time trading above 1.4 - most gains above this rate were negated 2 - 3x quicker than they were put in. Taking a look @ the Monthly chart, the aforementioned is illustrated by simply marking off the 1.4 level and tallying up all bars (including wicks) to get our figures.
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[li] 14 months
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The conclusion of this analysis leads us to believe that the EURO may not have the requisite strength to maintain the current bullish bias and that a reversal looms. Of the 3 last bullish waves to approach the 1.4 figure, diminishing buying strength is clearly present as represented by the flattening out of the bullish angular gains (black trendlines). The solid red print for the month of JAN 2014 was completely evaporated by the subsequent gains of FEB 2014, which may have lured buyers in to lay another attempt on 1.4.
However, half-way through the month of March, the market appears to be indecisive and is signalling a lack of continued buying interest and stalling @ the 1.39 - 1.40 zone.
Drilling into the weekly chart, our cautionary bullish sentiment is a bit more pronounced. The pair broke through our zone Q3/Q4 of 2011 to the downside, with a solid retest shortly thereafter leading to a 1600 pt decline. Naturally, the 1st pullback hits about the 50% mark and sellers are happy to step back in. The base of the current bull trend came off a 1500 pt decline into July 2012 - buyers gained confidence when a deeper pullback was put in, nearly wiping out that 2nd bear leg down. The lows held through the end of 2013 and through the current year, leading to the recent breakout structure in our 1.39 - 1.4 zone.
Here is where the proof is in the pudding- The clearing of the technical resistance level @ 1.3816 on March 6, 2014 (D1 CHART). With 3 recent touches off this level, sellers were accumulating and preventing any further gains. Most novices out there are taught “the more touches on a level, the more reliable it is” - yet, this can be quite the contrary unless you’re reading the price action which ensues. With each subsequent touch, sellers were making less ground, unable to put in a lower low. The highs were held, but, this should communicate orders being eaten away @ the 1.3816 zone, which then led to the breakout.
Given this analysis, there may be an opportunity in the med-longer term for a significant bear wave to overcome the EURUSD. As seen in the D1 chart, the pair has been stuck in an inconclusive range for the last 6 sessions. Monitoring primarily the D1 and the W1, an opportunity to get short in the 1.39 - 1.4 zone may present itself, targeting the lows of MAR 2013 initially and FEB 2014 longer term. Seeing we don’t just play one side of the market, a contrarian position would be feasible if buyers could hold the 1.38 figure and push through 1.4 with sellers conceding accordingly. Our initial short entry zone is 1.4050 - 1.4. This one may take some time to play out - so no rush.
