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EUR/USD Monthly Technical Analysis for February 2016

By:
James Hyerczyk
Updated: Feb 7, 2016, 00:01 UTC

The EUR/USD finished January slightly lower after posting a potentially bullish closing price reversal bottom in December. The chart pattern wasn’t

Monthly EUR/USD

The EUR/USD finished January slightly lower after posting a potentially bullish closing price reversal bottom in December. The chart pattern wasn’t confirmed, leading to an inside move chart pattern. The inside move suggests investor indecision.

Long-term investors are bearish because they believe more stimulus is coming from the European Central Bank in March and the Fed is likely to raise interest rates in either March or June.

Short-term investors are bullish because of the weakening equity markets. Since the Euro is a funding currency, whenever the stock market breaks hard, investors buy the Euro to pay back investment capital borrowed from Euro Zone banks. The EUR/USD is also being supported by those investors who have doubts about the Fed’s plans to raise interest rates in 2016.

Monthly EUR/USD
Monthly EUR/USD

Technically, the main trend is down according to the monthly swing chart. The trend will change to up on a move through the 1.1712 swing top. The downtrend will resume when the closing price reversal bottom at 1.0539 and the 1.0462 main bottom are taken out.

The main range is 1.3993 to 1.0462. It retracement zone is way up at 1.2240 to 1.2657.

The short-term range is 1.0462 to 1.1712. Its mid-point at 1.1087 is acting like a pivot and controlling the short-term direction of the market.

Based on January’s close at 1.0831 and last month’s price action, the direction of the EUR/USD in February is likely to be determined by trader reaction to the uptrending angle at 1.0752.

A sustained move over 1.0752 will signal the presence of buyers. The first upside target and potential breakout angle is at 1.0902. The monthly chart indicates there is room to the upside over this angle with the next target the December high at 1.1059. Taking out this level will confirm the closing price reversal bottom.

The next target is the pivot at 1.1087. Taking out this level could trigger an acceleration to the upside since the next targets don’t come in until 1.1232 and 1.1342.

A sustained move under 1.0752 will signal the presence of sellers. However, the early break could be labored because of potential support angles at 1.0682 and 1.0633. The latter is the last angle before the 1.0539 reversal bottom and the 1.0462 main bottom.

Watch the price action and read the order flow at 1.0752 this month. Trader reaction to this angle will tell us if there is counter-trend buying, or if sellers are maintain control. The chart indicates that the way of least resistance is up especially to and over the pivot at 1.1087.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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