EUR/USD Mid-Session Technical Analysis for August 5, 2019

Based on the early price action and the current price at 1.1153, the direction of the EUR/USD the rest of the session is likely to be determined by trader reaction to the short-term 50% level at 1.1155. Outside markets are going to be a big influence on the EUR/USD over the near-term especially the Japanese Yen. Don’t be surprised by a Bank of Japan intervention. Also on the table is possible U.S. retaliation against China allowing the Yuan to go below 7.
James Hyerczyk
EUR/USD

Lower Treasury yields and the shedding of higher-yielding assets like the U.S. Dollar are helping to drive the Euro higher on Monday. Traders are reacting to the news that China let its yuan weaken below 7 Yuan per dollar, an 11-year low, a sign of escalating tensions between the United States and China.

At 10:19 GMT, the EUR/USD is trading 1.1153, up 0.0046 or +0.42%.

Heightened volatility is likely to be the theme today especially if the Bank of Japan decides to intervene in an effort to drive down the Japanese Yen. Also the Trump Administration may accuse China of currency manipulation then try to weaken the U.S. Dollar in retaliation for the move. This could send the Euro soaring.

Daily EUR/USD

Daily Technical Analysis

The main trend is down according to the daily swing chart, however, momentum has been trending higher since the formation of the closing price reversal bottom at 1.1027 on August 1.

A trade through 1.1282 will change the main trend to up. A move through 1.1027 will negate the closing price reversal bottom and signal a resumption of the downtrend.

The short-term range is 1.1282 to 1.1027. Its retracement zone at 1.1155 to 1.1185 is the first upside target. Since the main trend is down, sellers could come in on the first test of this area.

The main range is 1.1413 to 1.1027. If buyers take out 1.1185 then look for the rally to possibly extend into its retracement zone at 1.1220 to 1.1265.

Daily Technical Forecast

Based on the early price action and the current price at 1.1153, the direction of the EUR/USD the rest of the session is likely to be determined by trader reaction to the short-term 50% level at 1.1155.

Bullish Scenario

A sustained move over 1.1155 will indicate the presence of buyers. The next target is the downtrending Gann angle at 1.1172. This is followed by the Fibonacci level at 1.1185.

The Fib level at 1.1185 is a potential trigger point for an acceleration into the main retracement zone at 1.1220 to 1.1265.

Bearish Scenario

A sustained move under 1.1155 will signal the return of sellers. If strong enough, this could lead to a test of uptrending Gann angles at 1.1267 then 1.1067. This won’t necessarily indicate that sellers have returned, and may actually set up buyers for a secondary higher bottom.

Overview

Outside markets are going to be a big influence on the EUR/USD over the near-term especially the Japanese Yen. Don’t be surprised by a Bank of Japan intervention. Also on the table is possible U.S. retaliation against China allowing the Yuan to go below 7.

A BOJ intervention should send the dollar higher and put pressure on the Euro. If the Trump administration decides to retaliate against possible Chinese currency manipulation then this will weaken the dollar and send the Euro sharply higher.

 

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