Has The Euro Dollar Finally Turned the Corner?

The Euro Dollar has continued to slide since topping out on July 2008 at 1.6038. However, sentiment on the euro has recently improved after European Union leaders agreed to massive stimulus plan to counter the corona virus. The deal will see the EU issue 750 billion euro ($882 billion) of joint debt to help member states.

Elsewhere, the Dollar Index, which measures the greenback against a basket of leading currencies, posted more than 4% decline in July. This is the biggest monthly drop since September 2010. Further easing of the US monetary policy and falling bond yields all contribute to this factor. As Euro Dollar is the single biggest component in the Dollar Index at 57.6%. the Euro Dollar has rallied tremendously in July.

Market consensus has shifted towards the Euro as the zone has been able to manage the pandemic better than the U.S. Thus, the economic damage will be less severe in the area. A long term trend line analysis in Euro Dollar below also might indicate a potential reversal in the single currency

Euro Dollar ($EURUSD) Weekly Chart

Euro Dollar broke above 2008 bearish channel

Weekly chart of EURUSD above shows a 5 swing sequence from the all-time low. The rally from all-time low to July 2008 high can either be counted as a diagonal (which is bullish and expecting another leg higher) or it can also be a 5th swing of a 7 swing WXY sequence. Either way, it implies more upside should be seen.

As we can see, the rally last month technically broke above the descending trend line since 2008 high. Not only that, we can see the pair also continues to hold within a well defined upward parallel channel. This development may suggest a potential change in the coming months for the pair. At the minimum it’s now possible to expect pair to at least do an extension from December 2016 low, which suggests Euro strength in coming weeks / months.

Note however that other USD pairs such as USDCHF still shows 5 swing sequence from 2016 low, thus there’s still a possibility that EURUSD can see one more low after ending the extension from December 2016 low. Nonetheless, in the medium term measured in weeks at least, we can continue to see EURUSD extending higher. A 100% extension from December 2016 low can take us to 1.289 - 1.342 area.

$EURUSD Daily Elliott Wave Chart

Daily Elliott Wave Chart above shows the rally from March 2020 low (1.064) looks impulsive. The rally remains in progress and once the 5 waves impulse rally is complete, it should pullback to correct that rally in 3, 7, or 11 swing before the next leg higher. The 5 waves rally can either end wave ((A)) or wave ((1)) in higher degree. Either way, as far as the pullback stays above March 2020 low, pair has scope to extend higher again in coming weeks / months.

Thanks for the analysis. I’m currently in a short on the EURUSD.

Short? are you profiting? Euro is raising like crazy and reached 1.18. But yes, it dipped at 1.8 after 1.19. Its seems like its time for reversal. Is this the reason why you are short? I closed my long position after a handsome profit.

You are correct. The long term prognosis IMO is upward. I was trading a small retracement. I took a small partial profit and then got taken out at BE on the overnight up move before it dropped again.

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@QuadPip Definitely not my choice. I like to go with the trend. Hope it works well for you.

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hahaha. that was a clever move. But, whenever i try out something like this, arrhhhh, 90% of the time i loose. So prefer sticking to the trend. What other instrument are you following apart from eurusd? I place a couple of trades on gold as well. The safest of all.

Yeah! its quite risky… I prefer to remain long as well.

I’m experimenting with trading inflection points. I don’t like sitting through retracements so I sometimes get out of my directional position to trade retracements in order to maximize profits and also to make margin available for perhaps a different pair that may be exhibiting more volatility. Trying to figure out when the larger retracements occur.

I learn best when I’m in the market. Otherwise it becomes an academic exercise and it does not register too well in my brain.

I’m trading a lot less at the moment since I’m trying to automate some of my trading and that is proving to be quite a challenge. :grinning: Normally I trade the majors most often and some crosses. I now keep away from the Yen and Swissy and all their related crosses. I’ve added GBP and some of its crosses.

Oanda does not offer Gold else I would love to trade it.

Interesting, I’m with OANDA and trade Gold. Maybe there are restrictions based on different countries?

Huh! Perhaps I’ve overlooked something. I’ll check it out. Thanks for letting me know.

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Plenty of gold here!

Yup, it’s a US only thing. They only offer forex trading to their US customers. No metals, indices, commodities or bonds. :frowning:

It turns out that your retracement prediction is actually working. EURUSD looks like consolidating between 1.19 and 1.17. I have close my buy positions ang going short. So far I have made good profits.
As you mentioned that you are trade small lots, testing the retracement for a larger one is actually very creative.
Gold is a very good opportunity specially in this covid situation. You can try out other regulated brokers who offer gold.

EURUSD might be done retracing. I’m going to get out at 1.1735 and look for a long entry.

Yup, placed two long trades on EURUSD. Profited so far. But i still feel that it will remain below 1.19 level as USA has started reviving. Extreme fall in jobless claims are surely aiding the economy.

Just placed my limit buy. Looking for price to bounce up from 1.1732.

For today CPI and core CPI data is due for USA. Forecast is much less than the previous figures by 50% as it is expected to drop at 0.3% when its previous was 0.6%. Hopefully good data will deflate the eurusd pair.

You might be right. I see resistance at 1.1980 and then at 1.2045. I’m still hanging on to my 1.1734 long. I had an add on order at 1.1781 and the darn thing bounced off of 1.1782. :rage:

Edit: Getting out at 1.1875 (if it gets there today) or will get out end of day, since it’s Friday. Will look to re-enter next week.

Happy weekend all!

@QuadPip Ever look into TD Ameritrade? You can trade FX with them. They have the Thinkorswim platform for FX. If you qualify, you can also trade stocks, options, futures, margin, and ETFs (crypto might be on its way).

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Thanks. I’ll take a look. I tried TOS sometime ago but did not like it. But that was very early in my trading journey. Perhaps I might have a different view this time.