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EURUSD Retrace rally then big drop

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No break out today alas, waiting for tomorrow's NFP and ISM manufacturing data releases maybe.  Looks like a small scale A-B-C retrace off the channel resistance line, similar on AUDUSD.  Might see another leg lower tomorrow or overnight, which could reach the Fib 50% but would expect price to return above the weekly channel line and close above by the end of play tomorrow if a breakout is on the cards.  Hopefully we will actually see a confirmed breakout tomorrow on both EURUSD and AUDUSD, maybe also GBPUSD.

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So no breakout so far and now 2 scenarios present, similarly to USD DX (see my what is the USD doing? thread).

Scenarios:

  1. Small scale a-b-c retrace of the recent high that just failed to break to a new high and then the rally fires up and breaks through that overhead key resistance (a la the chart from my previous post - turn may come around the Fib 62% 11,117 area)
  2. Much longer A-B-C retrace that retests the daily trend line breakout zone, again at the Fib 62% but off the larger rally and this time circa 11,000.

Ya pays yer money, ya makes yer choice.  Again the critical point is a break through the 11,160 key resistance area but if the market were to offer up 11,000 then that would be excellent to get ahead of the rally.

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Still not resolved.  I keep redrawing my weekly channel line and vacillating between bull and bear (well I am bullish so my vacillation is about timing).

My current thinking is that a break of the recent high is at key resistance and is therefore bullish but other signals are suggesting a pull back is on the cards, possible even if we get that breakout (i.e. a fakeout).  A much more satisfactory set up would be a pull back, maybe to retest my redrawn channel line at circa 11,065, the Fib 38%, and then a strong rally up towards 11.600 would be the prize.  11,225 would be another zone of resistance (I haven't drawn it in yet).

Not easy this one just now.  I would be keeping Longs from below the 11,065 area but would prefer to see that channel line retest.  Longs on the break out either need very wide stops (i.e. below 11,065) of very close to protect against a fakeout (but this risks a short term stop out and go).  The value of identifying the turns early once again is illustrated.

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EURUSD has also turned at key resistance with a lower high that sets up a potential A-B-C retrace.  Likely it will carry to the Fib 38% and a retest of the weekly channel line but could also carry further to the Fib 62% and a retest of the daily channel breakout zone.  As with AUDUSD, the key factor will be whether we see a retrace bear move that primes a big breakout rally or another test of the lower channel support zone.

EURUSD-Daily_041119.thumb.png.d9a803c04e1cb57badbfe2984eb290b9.png

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First target of 11060 achieved with a bounce and rally.  Will this stick or will we see a the lower target (11,000) hit?  Technicals support a rally here so it is a clear possibility but another leg down is also still possible.  Break of the recent pair of tops around 11,180 would seem to be critical.  I am Long off the turn with close stops just below the turn, let's see...

 

EURUSD-Daily_071119.thumb.png.4742ed179edf8826ca20fbb363639130.png

 

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No joy on that first level so I return to an alternative set up that looks at the Fib 62% level, also the breakout from the daily chart trend line, as the next likely level for a turn.  Note that in this set up the weekly trend line/channel line has not yet been broken so the risk of yet another lower low is there.  So I was wrong on this one, got stopped out for a small loss and wrong on stocks with a similar result but my glass is more than half full as I am very well placed Short on Gold/Silver.  In the end I only needed 1 to break for me, that's trading the turns.

EURUSD-Daily_071119.thumb.png.b585ea23aa7e63d1a2cba5a1c0cdd5bf.png

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EURUSD (and therefore likely USD generally) looks lie it may have achieved a turning point.  Possible small leg down to come to hit the Fib 62% but equally possible this pair trigger a channel breakout.  Strong PMD on 1H and 4H charts and the turn is at the previous channel breakout zone.

EURUSD-1-hour_131119.thumb.png.8948e8c1d3bb77c5d35af4d34df8e4db.pngEURUSD-Daily_131119.thumb.png.3085f298fd537cff013528d452d5f00d.png

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Potential channel breakout to the upside on EURUSD.  If this holds then can GBPUSD be far behind?  GBP has been stronger of late but I expect a reversal of that for a period, probably consistent with a strong EUR rally.  Watch out for a short term 1-2 rally and retrace before any rally really gets going.

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Breakout?  Wonder if we will see turns across the board...

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EUR CPI was out at 10am GMT but will the US Retail sales MoM (out at 13:30 GMT) affect EURUSD?

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EURUSD turned right on the Fib 62% off the 21 Oct high, my wave 1 (brown), which was also a retest of the daily chart resistance trend line breakout I had earmarked as a likely turning point previously.  The move down at the point of the recent turn was in an A-B-C form (retrace counter trend move) and there is significant PMD on the 4H and 1H charts.  In addition key oscillators were oversold on all relevant time frame charts.  On the 4H and 1H charts there looks to be a small retrace post turn, which could be a short term 1-2 (grey).  If this is the case I would not expect to see much of a further retrace at this stage, and not into that small 1-2 zone.  On the 1H chart I also have a channel breakout and that short term 1-2 falls beyond the breakout, which suggests a rally from here.  I am keen to see a 1-5 up to an initial wave 1 (light blue), thereafter a reasonable retrace to set up a big push rally.  A reversal back into the 1-2 zone on the 1H chart would give be cause for concern but at this point I am Long below that point and stop protected at BE so will be looking for buy the dips type opportunities once the breakout is established beyond doubt.

EURUSD-Daily_171119.thumb.png.3cec0ca86a820da116a3778ef3dea0e6.pngEURUSD-4-hours_171119.thumb.png.5db75361c13f0af4e24a11cb079db3de.pngEURUSD-1-hour_171119.thumb.png.fc73d812e6de468c769ede86affeba8d.png

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All the chatter is on stocks at present (will they wont they) but FX could be about to get interesting (i.e. volatile).  Looks like EURUSD is setting up to break out of the current short term retrace/consolidation to the upside to set up a test on the weekly resistance trend line.  A break here and of the associated horizontal resistance above will be a crucial test of whether or not this time the rally has legs.

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Looks like the rally has broken down and while a turn above the wave 2 (brown) low is still possible the nature of the price action and the DX charts are indicative of a lower low at present.

EURUSD-Daily_231119.thumb.png.34c286e20897c1472de44c1c9508d0ba.png

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EURUSD was all set to drop way past recent lows with a slightly lower low but a flourish of buying came in to reverse the trend with a significantly bullish candle.  We have strong PMD on both the daily and 1H supporting that bullish move late on Friday.  I might expect a little retracing back down on the open tonight/overnight but if we then see another turn and rally I will get more confident of the snapshot preemptive Long I took on the 1H pin bar and seek to add.  If my GBPUSD bullish scenario plays out then like as not we may see something similar on this pair.  However the macro case is less strong for EUR in my opinion with the EU being hurt by the actuality of a UK departure (remember the UK is the 5th largest economy globally, I look forward to the UK government with a majority flexing its muscles a bit more in negotiations).  In addition the Eurozone is well underwater in terms of interest rates, whereas the UK is still positive and will likely start to increase interest rates to get investment inward, thus goosing the GBP.  If the Fed continues its dovish path then the EURUSD will likely get a boost, just not as big a boost as the UK.

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DailyFX analyst comments on the EURUSD price movement: 

image.png

image.png 

Thought this might be of interest! great TA for the potential bear movement if you use these trend lines! 

Read the full articular here.

IG are not telling you which way to trade just sharing some technical analysis views from DailyFX. 

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Also, heads up today (GMT)

14:00: FYI - European Central Bank's President Christine Lagarde

15:00: USD ISM Manufacturing PMI (Nov) - Previous was 48.3, estimate is 49.2

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2 hours ago, CharlotteIG said:

IG are not telling you which way to trade just sharing some technical analysis views from DailyFX. 

To be honest I'd much rather hear from people with 'skin in the game' as anyone can sit in front of a graph and say 'if this then this, on the other hand if that then that'.

Edited by dmedin

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36 minutes ago, dmedin said:

To be honest I'd much rather hear from people with 'skin in the game' as anyone can sit in front of a graph and say 'if this then this, on the other hand if that then that'.

I see what you mean, hear which way people are trading who are using real money. It does make sense, not sure who out of our community is trading this but would be great to hear from them. 

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Obviously I don't concur with the IG analysis @CharlotteIG, but it wouldn't be much of a market if everyone agreed.  I see that set up as consensus but I am minded to the contrary for many reasons, some of which I outlined in my alternative GBPUSD rally thread last weekend.

From a technical perspective, once price made a new lower low on this bearish phase and then immediately rebounded back within support level in a 1H chart pin bar, that then carried back up to short term resistance and put in a daily chart pin bar reversal candle on the Fib 62% and completed and A-B-C pattern in the process with positive momentum divergence I discounted the break lower and set up for a rally entry.  In fact I entered after the 1H pin bar and added after the short term 1-2 retrace, which failed the channel retest at the Fib 50% as forecast (see 1H chart below).  I added again on the breakout of the short term resistance and now price action looks to be setting up another test of the weekly down sloping resistance trend line.  A break of this will be very bullish and if my GBPUSD contrarian rally scenario plays out (it isn't yet but that is expected, see my Triad thread) then this move of EURUSD could be motive rather than retrace so I am thinking to hold my Longs for the long term, but lets see how it shapes up.

EURUSD-1-hour_021219.thumb.png.bd546c6d4ea29af481a239302ff0790d.pngEURUSD-Daily_021219.thumb.png.5844393637167b4d45ab0d7d5085e294.png

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Breakout?  If so then this is off a shallow Fib 23% retrace, which together with the long term resistance trend line break, horizontal resistance break and oscillators coming out of oversold should push the breakout hard.  Perhaps from a fundamentals perspective the poor US data so far this week is eading traders to think Powell will go more dovish, thus giving Trump what he wants so everyone is happy, except Lagarde...

EURUSD-1-hour_041219.thumb.png.cea75bc6f9f602dc858cca83bfd8d5c9.png

 

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Big reversal in the past few hours.  My weekly chart trend line was not mapping correctly to the 1H, a major flaw of PRT.  I have corrected it and now the set up looks more like a wave 1 turn on the weekly resistance channel line.  If correct we should see a retrace, likely a fairly significant one that should close the small price gap around the Fib 50% and maybe do a retest of support at the Fib 62%.  Might also get a retrace on GBPUSD in tandem.

EURUSD-1-hour_041219A.thumb.png.744cf5c41da6745513587e63718b0837.png

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