EUR/USD Monthly Technical Analysis for August 2016

The Euro posted a higher close and inside move in July, indicating trader indecision and impending volatility. The EUR/USD finished the month at 1.1174, up 0.0070 or +0.63%. The Euro was under pressure early in July when the U.S. economy showed signs of strength and traders increased the chances for a September rate hike by the Fed.

These ideas went away when the Fed issued a dovish statement and the U.S. released weaker-than-expected second quarter GDP data. Since the Fed doesn’t meet until September, Euro buyers may get a free pass this month. However, the U.S. Non-Farm Payrolls report could be a bump in the road for the EUR/USD if the report beats the estimates.

TECHNICAL ANALYSIS

The main trend is up according to the monthly swing chart. A trade through 1.1616 will signal a resumption of the uptrend. A trade through 1.0539 will turn the main trend to down. Momentum has been to the downside since the closing price reversal top in May.

The short-term range is 1.0462 to 1.1712. Its 50% level or pivot comes in at 1.1087. This price level is controlling the direction of the market. The close over this level will give the EUR/USD an early upside bias in August.

Based on July’s close at 1.1174, the direction of the market is likely to be determined by trader reaction to the short-term uptrending angle at 1.1179.

A sustained move over 1.1179 will indicate the presence of buyers. This could create enough upside momentum to challenge a pair of downtrending angles at 1.1376 and 1.1496. The latter is the last potential resistance angle before the 1.1616 main top.

The inability to overcome 1.1179 will signal the presence of sellers. Crossing to the weak side of the steep downtrending angle at 1.1136 will put the EUR/USD in a bearish position with the next target the pivot at 1.1087.

The daily chart opens up to the downside under 1.1087 with the next targets the June low at 1.0910 and the uptrending angle at 10859.

CONCLUSION

Look for an upside bias in August on a sustained move over 1.1179 and a downside bias on a sustained move under 1.1136.