EUR/USD: Big Move Coming, Don’t Get Caught Using the Wrong Chart

What’s at stake in the EUR/USD can’t be seen on the four-hour chart. Fresh yearly low? Try lowest level in more than two years. Major support for May? I don’t think so. Major double-bottom formed only 19 days apart? If you say so. If you want to make big money, you have to trade the big charts. So put on your big-boy pants and let’s take a look.

The weekly EUR/USD chart is the one you should be watching. Just like some analysts are looking for the U.S. stock market to roll-over to the downside, this chart indicates the EUR/USD can do the same thing.

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. A trade through last week’s low at 1.1108 will signal a resumption of the downtrend. If sellers can accomplish this convincingly then the EUR/USD will also cross to the bearish since of a minor bottom at 1.1109 from the week-ending June 2, 2017. This may be the trigger point for an acceleration to the downside. And if you look at the weekly chart, the next series of bottoms don’t come in until 1.0569, 1.0493 and 1.0339.

So yes, we are at a serious level. Now breaking these levels doesn’t mean you sell and close your eyes. You should use this chart as your guideline and place your orders off the smaller time frame charts. In other words, analyze top down, and trade bottom up.

The two year range is 1.0339 to 1.1255. Its 50% to 61.8% retracement zone is 1.1447 to 1.1185. Most of the trading activity has been in this zone since October 2018. After a mostly sideways trade, the EUR/USD is now on the weak side of this retracement zone.

Aggressive short-sellers may start to build a wall of resistance at the Fibonacci level at 1.1185. If they do, then they are almost telegraphing lower markets.

We should know over the short-run if the EUR/USD is getting ready to dump from current levels by reading the reaction to 1.1109 and especially at 1.1185. Furthermore, if you can take a look at the order flow, you’ll be able to determine if short sellers are dominating the trade.

I can build a case for a sell-off failing if there is little follow-through to the downside under 1.1108 or if there is a dramatic closing price reversal bottom. One that knocks the shorts right out of the box.

Regaining 1.1185 and re-establish support at this level will also signal the selling is getting weak, and the buying perhaps stronger. However, the key indicator to watch is the downtrending Gann angle at 1.1215 the week-ending May 31.

This angle, moving at a pace of .002, from the 1.12555 top has been guiding the EUR/USD lower for 67 weeks. There have been two penetrations of this angle. The first the week-ending March 22 and the second, the week-ending May 17. If buyers can take out this angle convincingly and hold above 1.1185 then we could see a rally.

Furthermore, if the Euro does plunge through 1.1108 then look for the U.S. Dollar Index to scream to the upside and for gold prices to break sharply.

Of course, there are no guarantees, but from where I’m sitting things are taking place on the EUR/USD weekly chart that can’t be seen on the 4-hour or even the daily chart. Happy trading.