EUR/USD Monthly Technical Analysis for October 2016

The EUR/USD traded in a narrow range on relatively low volume in September. The price action was influenced by worries over the impact of Brexit and the possibility of a Fed rate hike. However, the biggest influence was likely investor sentiment and demand for higher risk assets.

Since the Euro is now a funding currency because of the European Central Bank’s negative rate strategy, it tends to go down when stocks to up and it tends to rally when stocks go down. Since U.S. equities were relatively flat to lower in September, the Euro went up slightly.

Last month the EUR/USD close at 1.1240, up 0.0083 or +0.74%.

In October the Euro will be largely influenced once again by investor sentiment and any news about Brexit. It should feel pressure if stocks rally because increased demand for higher risk assets will mean more investors will borrow money from Euro Zone banks. In other words, they’ll be taking money out of Europe by selling Euros.

TECHNICAL ANALYSIS

The main trend is down according to the daily swing chart. The trend will turn up on a trade through 1.1616. A move through the minor low at 1.0910 will indicate the selling is getting stronger, however, the downtrend will not resume until 1.0539 is taken out.

The short-term range is 1.0462 to 1.1712. Its 50% level or pivot is 1.1087. Trader reaction to this pivot will determine the direction of the EUR/USD in October.

FORECAST

BASED ON THE CLOSE AT 1.1240, A MOVE OVER 1.1339 WILL INDICATE STRENGTH WITH 1.1416 THE NEXT LIKELY TARGET, FOLLOWED BY 1.1616.

A BREAK BELOW 1.1216 WILL SIGNAL THE PRESENCE OF SELLERS WITH THE NEXT TARGET 1.1087. THIS IS THE TRIGGER POINT FOR AN ACCELERATION TO THE DOWNSIDE WITH 1.0939 AND 1.0910 THE NEXT TARGETS.

IF 1.0910 FAILS AS SUPPORT THEN WE SHOULD SEE ANOTHER ATTEMPTED BREAK DOWN INTO AN ANGLE AT 1.0739.

LOOK FOR A SIDEWAYS TRADE IN OCTOBER IF THE EUR/USD REMAINS INSIDE 1.1339 AND 1.1216.

WATCH THE PRICE ACTION AND READ THE ORDER FLOW AT 1.1087 ALL MONTH. THIS PRICE WILL BE THE MAIN DETERMINANT OF THE EURO’S DIRECTION THIS MONTH.