So USD/JPY didn’t exactly bounce as I thought it would after consolidating at 110.00. Heck, the pair even broke below the level and is now trading around 108.50!
While I wait for another opportunity on USD/JPY, I’m setting my sights on EUR/USD. Think it’s too late to jump on the euro bear bandwagon?
As you can see, the pair is confined by a descending trend line on the 4-hour chart. Oh, but what’s this? It’s also being supported by the 1.1125 handle!
Euro bears were certainly given reasons to sell the common currency these past few days. For one thing, the latest EU election results point to a hard Brexit or even another rocky period in Italy’s political scene that would threaten the EU’s economic stability.
Last week’s euro zone PMI results also don’t help. They came in much weaker than analysts had expected, which isn’t good amidst global trade uncertainty.
The dollar hasn’t been so hot either. Aside from a lower GDP adjustment and falling equities, Trump’s tweets against China, Mexico, and threats of impeachment aren’t bringing the bulls to the dollar’s yard.
This is why I’m on a wait-and-see mode with EUR/USD’s triangle. On one hand, a retest of the 1.1200 major psychological handle would mark a good entry for trend continuation.
But not all descending triangles lead to upside breakouts. Though the odds tilt towards further downside moves, the lack of fresh (bearish) catalyst for the euro and more uncertainty in the U.S. just might lead to an upside breakout for the pair.
Let’s see how EUR/USD trades in the next few days. I’ll be on the lookout for short opportunities if it starts going back and consolidating around the trend line and the SMAs. A convincing break above the trend line, on the other hand, could lead to retests of the 1.1300 or even 1.1400 previous areas of interest.
What do you think? Does EUR/USD’s downtrend still have enough juice? Or is it time for the bulls to step up?
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.