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Is it me, or is EUR/USD seeing the start of a downtrend on the 1-hour time frame? Here’s what I have so far:

As you can see, EUR/USD bounced lower from the 1.2000 major psychological handle, which not only lines up with last week’s low, but also a 50% Fib retracement, falling channel resistance, AND a possible SMA crossover on the 1-hour chart. Oh, and there might also be a bearish divergence thrown in the mix!

EUR/USD 1-hour Forex Chart
EUR/USD 1-hour Forex Chart

On the fundamental side, we’ve seen the euro rocket against the dollar when a widely-cited Bloomberg report hinted that China might stop (or at least slow down) its purchases of U.S. Treasuries. However, the report also said that it wasn’t clear whether the recommendation was accepted or not.

This is probably why the euro also turned back down before you can say “reversal!” Meanwhile, traders can’t seem to get over the weak German factory orders printed earlier this week as they continued to sell the euro despite better-than-expected German industrial production and trade balance reports.

Until traders go back to pricing in a hawkish ECB or more gloom and doom for the dollar, I think there’s opportunity in trading a possible short-term reversal for EUR/USD.

A stop above the falling channel could make for a good trade especially if the pair drops back to its previous lows or even the area of interest near 1.1875.

What do you think? Will euro bears get their momentum this week?

See also:
My Q4 2017 Forex Trade Review and Reflections
Latest version of the HLHB Trend-Catcher System

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