Quote of the day:“Lack of money is the root of all evil.” - George Bernard Shaw
Good morning. The euro holds well Monday’s lows and current signals are mixed, both daily and weekly charts suggesting that more upside is likely, but there are some big warning signs on both charts – mainly around 1.4000/50 where a potential breakdown could turn into something quite ugly – see charts below. The USD Index, which is inversely correlated to EURUSD looks interesting too, as price is approaching the rising trendline connecting recent higher lows after the rejection into mid 76 where a nice reversal candle is seen. The highlighted support trendline corresponds to EURUSD’s 1.4350-1.4400 as the pair is lagging behind dollar index due to pressure in Eurozone, but it’s definitely worth keeping an eye on this support zone in the coming days. If it holds, then a breakout scenario into the 76-77 zone would be the next thing to expect and that would turn into EUR’s break below 1.4000-1.4050.
What’s interesting in EURUSD’s daily chart right now is that we have several long tailed candles into support zone lately, but since recoveries have been short-lived – the whole situation looks rather like “buying more time” (for EUR) than reversals or uptrend continuation patterns. Tomorrow’s Eurozone summit in Brussels is the key event and it should give us a hint on what to expect in the near-term. I remain bearish on EURUSD as long as the pair is still near the bottom zone around 1.400, therefore I prefer to stay on bears’ side for now – looking for selling opportunities on signs of weakness. Speaking of selling, I exited yesterday’s short for a small loss as price returned above 1.41. The US Existing Home Sales is one of the important events in the FX calendar today.
Trading strategy: standing aside / looking for a selling opportunity on potential break below 1.4100 (preferably a 4hrs bar close below), with an initial stop at 1.4160 (0.5% risk), target open
Support: 1.4100, 1.4050, 1.4000/20, 1.3900 and 1.3840/60
Resistance: 1.4180/00, 1.4250/80 1.4350/00
Market sentiment: long term – mixed, medium term – bullish, short term – bearish, intraday – mixed
EURUSD daily chart 7-20-2011
USD Index
Dollar Index daily chart 7-20-2011
EURUSD weekly chart 7-20-2011
Have a great day!
- Continue reading: EURUSD Holds Above Support Zone Before Eurpean Summit Day
