Chart of the Day: Despite Current Up-Trend, Euro Weakness Will Continue
Investing.com | Mar 18, 2019 10:34
The PMI numbers, beat analysts' expectations. And Credit Suisse (SIX:CSGN) analysts found that upside macro surprises in Europe, relative to those in the U.S., means the euro typically strengthens within the three-month period that follows.
However, we remain euro-bearish, based on the supply and demand balance, borne out by the technical patterns in the chart below.
EUR Daily Chart
The euro is on the rise, breaking out of a two-day congestion, resuming its rebound from below 1.12. However, this rally should be considered a correction within the downtrend. The rebound followed a new trough, below the November low, extending the downward trend.
The single currency has been trading within a descending channel since June. It has completed a Head & Shoulders continuation pattern, whose neckline it is retesting today.
Both the 50 and the 100 DMAs have provided resistance to the early-March peak, with the 200 DMA aligning at the channel top.
h2 Trading Strategies – Short Position Setup/h2Conservative traders would wait for a close below 1.1300 to demonstrate that the neckline indeed reversed from a support to a resistance.
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Moderate traders would be content with a close below the neckline, below 1.1340 at the current angle.
Aggressive traders may risk a contrarian position right now, providing they understand the risk and manage their trade accordingly.
Trade Sample
- Entry: 1.1350
- Stop-Loss: 1.1370, above 50 & 100 MAs
- Risk: 20 pips
- Target (NYSE:TGT): 1.1250, February lows
- Reward: 100 pips
- Risk Reward Ratio: 1:5
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