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James Hyerczyk
EuroDollar Notes

The Euro is trading in a tight range on Tuesday. Prices continue to be influenced by the news that German Chancellor Angela Merkel would not seek re-election as head of her Christian Democrats (CDU) party. The single-currency is also being pressured by the ongoing standoff between Brussels and Rome over Italy’s free spending budget that would breach the European Union’s fiscal rules.

At 1003 GMT, the EUR/USD is trading 1.1362, down 0.0011 or -0.10%.

Buyers are being cautious because if the coalition in Germany collapses before 2019, that coupled with escalating problems in Italy could lead to a steep sell-off.

Daily EUR/USD

Daily Technical Analysis

The main trend is down according to the daily swing chart. However, downside momentum has slowed due to Friday’s closing price reversal bottom, which may be an indication that the buying is greater than the selling at current price levels.

A trade through 1.1422 will confirm the closing price reversal bottom. This will shift momentum to the upside and could trigger the start of a 2 to 3 day counter-trend rally.

A move through 1.1335 will negate the closing price reversal bottom and signal a resumption of the downtrend. This could lead to a test of the August 15 main bottom at 1.1301.

The minor range is 1.1335 to 1.1422. Its 50% level or pivot is 1.1379. This price is controlling the short-term direction of the EUR/USD.

The short-term range is 1.1555 to 1.1335. Its retracement zone at 1.1445 to 1.1471 is the next upside target. It is resistance.


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Daily Technical Forecast

Based on the early price action, the direction of the EUR/USD the rest of the session is likely to be determined by trader reaction to the minor pivot at 1.1379.

Bullish Scenario

A sustained move over 1.1379 will indicate the presence of buyers. This could trigger a counter-trend rally into a pair of downtrending Gann angles at 1.1422 and 1.1435. The Gann angle at 1.1422 forms a resistance cluster with Friday’s high at 1.1422. Since the main trend is down, sellers are likely to come in on a test of this area.

Bearish Scenario

A sustained move under 1.1379 will signal the presence of sellers. If this creates enough downside momentum then we could see a test of 1.1335.

Crossing to the weak side of the steep downtrending Gann angle at 1.1315 will also put the EUR/USD in a bearish position with 1.1301 the next likely downside target. This is a potential trigger point for an even steeper sell-off.

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