I have been noting in my w/e analysis reports over recent weeks/months how the EUR/USD could either be setting up for a major ‘Bear Flag’ breakdown or trying to base by forming a potential ‘Double Bottom’. For me, the 1.045 remains the support level to watch but a 6-week bear trend line and, as a consequence, the 1.12 level have come into focus as well.
E/U weekly: A ‘Bear Flag’ trying to get going OR a basing-style, bullish-reversal ‘Double Bottom’?
USDX weekly: much will depend on where the USDX heads from here. Many think a move above 100 is a certainty with any Fed rate hike BUT I’m not so sure that this isn’t already price in.
E/U 4hr: the E/U has been in decline for the last six weeks and a Bear trend line can be seen in force here now:
Adding Fibonacci retracement to this 6 week move is rather interesting though. A 61.8% fib retrace would bring price back up to test the major Bear Flag trend line that was broken 4 weeks ago. Now, a pullback and test of this trend line, even if bearish continuation resumes after that, isn’t out of the question. Thus, I’d be watching for any break and hold above the recent bear trend line to possibly support a pullback to this broken Bear Flag trend line.
Note also though how this 61.8% fib and TL highlighted zone in the above chart is also near the monthly pivot and 1.12 region. The 1.12 region is also a key region on the monthly chart as it is the 61.8% fib of the major 2000-2008 swing high move. That’s what they call….confluence!
E/U monthly: showing importance of the 1.12 region:
E/U 4hr Cloud: price is still below the 4hr Cloud for now so I won’t be getting any new TC LONG signal just yet:
E/U daily: also note how the current candle formation on the daily chart is rather similar to a bullish-reversal ‘Morning Star’ pattern:
Summary: Many are bearish on the EUR/USD and ECB v Fed interest rate policy divergence has been the main reason for this. However, any tepid and slow paced rate hike from the Fed may not be enough to sustain divergent price action. I’m not predicting anything here but, rather, wondering and keeping an open mind to the potential of some EUR/USD recovery. Either way, a bit of a pull back, even if only temporary, would not be out of the question anyway. Keep an eye on the following S/R levels:
- the recent Bear trend line and
- the 4hr chart’s 61.8% fib near 1.12 and the weekly chart’s broken Bear Flag trend line.
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