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It’s do or die for EUR/USD!

As you can see on the chart below, EUR/USD is back down between the 1.0500 to 1.0600 area after getting rejected at the 1.0800 psychological handle.

What makes the current price levels so interesting to me is that the euro hasn’t (successfully) broken below the area since early early 2015. In fact, even its record lows around 1.0340 is only a few pips away from the support level.

So, are we in for another retest and bounce from the pair’s major support area? The chart is currently giving mixed signals with its oversold stochastic signal and a 100 SMA that had held as resistance earlier this month.

EUR/USD Daily Forex Chart
EUR/USD Daily Forex Chart

On a fundamental basis, I don’t see a lot of catalysts that could push the pair higher. For one thing, upcoming elections in some of the euro zone’s biggest economies are giving investors the heebie-jeebies. Of course, it also doesn’t help that the U.K. is about to leave the EU and that Grexit headlines are back under the spotlight lately.

The biggest factor that’s likely to push the pair higher is if the Greenback would return to its bearish course. Trump talking about protectionism or the dollar’s strength, for example, could scare forex bulls into selling the scrilla. But Trump is on a Twitter time out, Janet Yellen was surprisingly hawkish in her latest speech, and U.S. equities are heading to the moon.

So, unless fiscal and monetary policy decision-makers in the U.S. hint otherwise, it’s likely that the dollar’s rally will continue and give way for euro bears to attack.

Over the next couple of days, I’ll be looking closely at how EUR/USD reacts to the 1.0400 – 1.0500 handle. If the pair shows hesitation candles around the area, then I’ll be waiting for possible fundamental catalysts that could push it higher.

But if we don’t see any significant changes in the fundamental picture anytime soon, then I’ll be on a lookout for a possible break below the pair’s record lows and sustained downtrend for the euro. Any tips on how a trader can trade a breakdown to new record lows?

Huck's Signature

See also:
Latest Weekly Trading Prep
My Q4 2016 Forex Trade Review and Reflections
HLHB System’s 2016 Performance Summary
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