EUR/USD Daily Forecast – Bears Eye Stops Below Mid-June Low

EUR/USD has broken out of a one-week range and appears to be making a run for stops below an important low set in the middle of June.
Jignesh Davda

EUR/USD Dips Below 1.1200 Handle

After consolidating within a range for just over a week, EUR/USD is under pressure in early trading on Tuesday, and has fallen below the 1.1200 handle. The pair appears to be targeting stops set below the mid-June low.

In the middle of June, the pair was supported by a horizontal level at 1.1184 that had held it higher in March and in April. From the level, the pair rallied more than 200 pips in the second half of June, as market participants digested a dovish shift in US monetary policy.

Recall that the pair made lows in the middle of June just after a speech from ECB President Draghi that was much more dovish when compared to the earlier ECB meeting.

This week, the ECB will meet again, expectations are building that they will be significantly more dovish than last month. I expect the meeting will trigger a lot of volatility. Ahead of it, I’m wary of any fake breakouts, hence the current decline in EUR/USD may not necessarily signal a breakdown.

Technical Analysis

For some time now I have speculated that EUR/USD will try to trigger stops below the mid-June low. It is such an important area when reflecting back on the events that have unfolded over the last month and a half or so.

Specifically, I’m talking about the shift in US monetary policy which put pressure on the dollar. It seems likely that many EUR/USD bulls playing this theme have stops below this low, considering the timing of it all.

EURUSD Daily Chart

A relief rally often follows a stop run. This is the view that makes the most sense to me at this time.

In this context, a daily hold above 1.1184 will be important. I do expect that we will dip below the June low of 1.1181 at some point in the day today.

Bottom Line

  • EUR/USD is attacking support at 1.1184.
  • I expect an intraday slide below the level. Though I think the daily close in relation to the price point will be important.
  • It’s hard to put a lot of weight to the current range break. Especially with the ECB meeting just a few days away.
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