WHERE NEXT FOR THE EUR/USD? by Scott Pickering

Then to rub salt in the wound….

As we all know the range bound FX market was giving us nothing to trade, and I would NOT chase the AUD lower so, I was sidelined on making pips and $$$. I had several live trades, but they were not moving, that was until last Wednesday.

So now, I find myself in a positive pip position for the month, not a brilliant month’s performance at all versus my Q1 performance but positive nevertheless from which I am taking pleasure from.

On Wednesday night, I wrote my end of day overview for subscribers suggesting that whilst I felt that there was more upside moves in the DXY and downside moves available with the EUR, because of very low volatility for many weeks most of our trading charts were showing either overbought or oversold conditions and technically these needed to be worked through so we may have a day or two of not much activity to follow Wednesday’s volatile move. I said to expect consolidation.

Into the end of last week, we basically consolidated the move lower. We had an excited reaction to the U.S. Advance GDP which smashed expectations but then pulled back. We are when it all comes down it, consolidating ahead of this coming week which could be epic… then, if I recall, the last time I was all excited about potential moves bugger all happened in fact watching paint drying would have offered up loads more adrenaline pumping action.

So, in summary of the events of the past few weeks, the market was trapped in my opinion by the EUR/USD, and, it has now broken down so what is the next move?

WHERE NEXT FOR THE EUR/USD?

For weeks, I have been talking on twitter about the following in relation to the EUR/USD (see that chart below): –

1. The Descending Wedge (BURGUNDY DRAWING).
2. The Weekly “GAP FILL” going back to April 2017 (LIGHT BLUE DRAWING).
3. The TRADING RANGE (BLACK DRAWING).

Now my thoughts on what I think is going to happen, are NOT guarantees. Whilst I have a reasonable rate of success, I am wrong at times.

For me, this chart tells its own story and from my perspective it’s an easy read. The great thing about FX is that there is always an alternative perspective on the same chart. Two people will nearly always interpret the same data differently.

From my perspective: –

1. This WEEKLY CHART is Bearish.
2. The last two weekly candles are nice red candles, that indicates that sellers are in control.
3. We are breaking down below, very long-term, well tested support, that has held, and, originates as far back as the summer of 2017.
4. Yes, there is trend line support from the descending wedge, but this is currently over 100 pips away closer to 1.1000 than 1.1100. The current price is 1145.As we know, in about 70% of cases a descending wedge pattern usually produces a very powerful reversal move. We are close to this being triggered, or, are we?
5. Below the wedge support we have a “GAP FILL” from 2017 at 1.0780. I think that this is a potential target for the market before we see buyers stepping in.
6. I am NOT saying we dive straight to 1.0780 should the wedge support give way. If the pair moves lower, initially, we will see consolidation at several levels to confirm the move. Back tests will happen as further confirmations take place. The move lower is of course not a guarantee, but we should remember any move lower will not be a straight dive, it will take time.I just think that to expect a 300-400 pip drop is not going to happen in a few sessions it could take a couple of weeks at least.
7. Should the “GAP FILL” level of 1.0780 not hold then you can see the 1.0600 level around the 88% Fibonacci retracement is next in line.
8. If that also fails to hold back sellers, next we have the 2016 low of 1.0331.
9. Then, after that its parity as far as I am concerned.

The above steps 1-9 is how I read the chart.

Looking from another perspective. There are always traders who can pick bottoms. They can see a bullish move out of a bearish chart. I am not that good. I can only see what the chart gives me. I look for high probability lower risk moves.

From this chart, the bullish move that I can see is the descending wedge pattern. This comes into play should the trading range support breakdown. The reversal move should it trigger could see the EUR/USD heading back towards the 1.1440 area, the 50% Fibonacci level. But nothing else, in my opinion. The trend on longer-term charts is still bearish.

So, what to do?

I have given my interpretation. I have my levels targeted. Basically, be on guard around the wedge support, tighten stops if you are already short and add if the breakdown continues.

I have an open mind, I know what I want to happen, but it may not. However, I know my RISKS and when it is higher RISK to be in my trade. As a retail trader that is about the best that you can do.

FOREX REVIEW:

 1. FX – FORWARDS, BACKWARDS & SIDEWAYS:

1.1. THIS WEEK’S ECONOMIC DATA:
NOTE: Only the items that interest me are listed here.

 

1.2. BIAS CHART – USD MAJORS SUPPORT and RESISTANCE:

 

1.3. USD INDEX (DXY) OVERVIEW – MY THOUGHTS:

The Daily DXY chart is below and my thoughts, ideas and comments regarding the DXY are contained on the chart.

 

1.4. USD MAJORS – TRADING CHARTS and MY THOUGHTS:

1.4.1. EUR/USD:

My comments earlier in the blog refer to my thoughts about this pair.

I have repeated them below along with the EUR/USD weekly chart.

From my perspective: –

1. This WEEKLY CHART is Bearish.
2. The last two weekly candles are nice red candles, that indicates that sellers are in control.
3. We are breaking down below, very long-term, well tested support, that has held, and, originates as far back as the summer of 2017.
4. Yes, there is trend line support from the descending wedge, but this is currently over 100 pips away closer to 1.1000 than 1.1100. The current price is 1145.As we know, in about 70% of cases a descending wedge pattern usually produces a very powerful reversal move. We are close to this being triggered, or, are we?
5. Below the wedge support we have a “GAP FILL” from 2017 at 1.0780. I think that this is a potential target for the market before we see buyers stepping in.
6. I am NOT saying we dive straight to 1.0780 should the wedge support give way. If the pair moves lower, initially, we will see consolidation at several levels to confirm the move. Back tests will happen as further confirmations take place. The move lower is of course not a guarantee, but we should remember any move lower will not be a straight dive, it will take time.I just think that to expect a 300-400 pip drop is not going to happen in a few sessions it could take a couple of weeks at least.
7. Should the “GAP FILL” level of 1.0780 not hold then you can see the 1.0600 level around the 88% Fibonacci retracement is next in line.
8. If that also fails to hold back sellers, next we have the 2016 low of 1.0331.
9. Then, after that its parity as far as I am concerned.

The above steps 1-9 is how I read the chart.

 

1.4.2. GBP/USD:

No change here since last week. We have seen an uptick in BREXIT headlines in particular between the Tory and Labour front benches trying to get to some agreement on a united way forward. However, it looks like the Theresa RED LINES are not for moving!!

I am long with small positions with several GBP cross-rates, and, I am prepared to hold these positions throughout the protracted negotiations. Last week, I took another 100 pips of profit off the table with these trades but my profit taking has diminished somewhat in particular when the House of Commons MP’s were in their Easter recess.

In my opinion, there is not a lot to do here with this pair pre-BREXIT withdrawal agreement being signed off. The safe trade is to wait and see, rather than second guess the UK political scene.

As mentioned last week, the pair looks to some extent constructive, but it is a very high-risk trade. As you can see from the attached chart, we still have an inverted Head and Shoulders pattern in play.

 

 

1.4.3. AUD/USD:

I am in a love / hate relationship with this currency.

I advised subscribers earlier this month that the AUD/USD was the King of false breakouts. Suffice to say, it failed at 0.7200, dropped to sub 0.7000 and has spiked back to c.0.7050.

We are in a trading range of 0.6980 to 0.7300 and until the U.S. / CHINA trade deal is sorted, I am not going to touch anything AUD.

In all, the will it / won’t it, false break out shenanigans, had me caught out twice and took losses of c.350 pips across several AUD pairs.

I am of the opinion that this currency will be a loser on any trade deal between the U.S. and CHINA and therefore my thought process is that we will have a buy the rumour sell the news event on our hands. I want to sell the rip….

 

1.4.4. NZD/USD:

Very similar to the AUD. The NZD would also be a loser, maybe not quite on the same scale as the AUD, but definitely a loser on any U.S. / CHINA trade deal.

We are breaking down and re-testing breakdown levels. The RBNZ is very dovish and I expect this commentary to weigh increasingly on the NZD moving forward.

Bounces have been very minimal in the past week and my thoughts are that Adrian Orr, Governor of the RBNZ wants to see the NZD much lower as time goes forward. I can see a couple of Central Bank interest rate cuts to really push this pair lower as time moves forward this year.

I remain bearish the NZD.

 

 

1.4.5. USD/CAD:

We still have an inverted Head and Shoulders pattern in play, and, finally I am now long albeit at the breakout point following the BOC interest rate decision last week. I entered long on a breakout re-test; at the moment I am a little under water, but I do see this pair much higher towards 1.3600 in the coming sessions.

OIL will still attempt and probably win the fight to dominate and the CAD is still a lead indicator that I trust… I am just not sure long-term what to do with it. I will have to be patient. For now, I see the upside potential.

 

 

1.4.6. USD/CHF:

No change from last week’s comments except that I want to add… damn, bugger, bollocks, glaze my nipples and call me Rita as well as Jesus, Mary and Joseph. I am so annoyed with myself I have missed this move to 1.0200.

As one of my former, go to currency pairs I am embarrassed with myself on how and why I have ignored it for most of Q1 and Q2 so far.

I see this pair higher through this year.

I am so bearish the EUR/USD, I should be bullish this pair.

There is strong support at 0.9970, that would seem a reasonable level to look at entering long…. that level does not seem that it’s about to be tested for a while…

As I wrote last week and I am still waiting to get involved, I am a buyer on dips… subscribers get ready my CHF mojo is about to re-appear!

 

1.4.7. USD/JPY:

My thoughts longer term are that this pair will be closer to 105.00 at the end of 2019.

Finally, I am short and holding…

 

 

2. THE WEEKLY FX PREMIUM TRADING SUMMARY:

April 2019 so far:      +314 net profitable pips.
2019 year to date:    +6,017 net profitable pips.

The WEEKLY FX PREMIUM is my subscribed based FX support option, which offers, subscribers’ full access to my suggested trade set-ups and my market commentaries.

If you go to my website you will see more information about the WEEKLY FX PREMIUM, including the “SUBSCRIBE” tab at the top of my welcome page.

My website www.weeklyfxdrivethru.comhas full details of my trade projection for 2019 along with reasons why you should consider joining my other subscribers at the WEEKLY FX PREMIUM. You will this information under the “History and Performance “tab

Plus, my website also contains full details of the subscription options available. You will find this under the “Subscriptions” tab.
  

3. WEEKLY FX PREMIUM SUBSCRIBERS ONLY:

Content in this section is for “fee-paying” subscribers only.

 

4. THE FINAL SHOT:

Nothing more to add here, I have said enough except,

As usual…

Always remember longevity in Forex trading can only be achieved through trading with good RISK and MONEY MANAGEMENT, and above all set your position sizes in accordance with the size of your account and allow for some flexibility.

Scott Pickering
The Pip Accumulator
Twitter: @pipaccumulator
https://weeklyfxdrivethru.com/disclaimer/

BLOG VERSION: #319 FREE NEWSLETTER
DATE: 27^thApril 2019