Strong Reversal In The EUR/USD

“Whipsaw” is becoming the adjective of the day, with reversals being the norm across the forex and commodity markets. No doubt, the action is a result of Friday’s trade war fallout and developments over the weekend at the G7 Summit. One such instrument that has experienced a large change in direction is the EUR/USD.

The U.S. mid-session has brought the bi-monthly U.S. short-term Treasuries Auction. Bucking recent trends, both the 3 and 6-Month T-bills showed a bit of strength. Today’s auction brought a rise of 0.05% in the 3-Month T-bill, with the 6-Month holding steady at 1.84%. For the moment, it appears as though institutional capital has taken a break from its run to bonds.

Accordingly, the Greenback is in the midst of regaining Friday’s losses. Action in the EUR/USD is evidence, as rates are approaching intraday lows near 1.1100.

EUR/USD Reverses Off Session Highs

On Friday, currency players made an about-face at the USD, anticipating further developments over the weekend at the G7 Summit. No real market drivers emerged, prompting a relative buyback of the USD across the board. For the EUR/USD, the muted G7 has brought about a reversal of Friday’s bullish fortunes.

Here are the EUR/USD levels to watch for the near future:

• Resistance(1): Daily SMA, 1.1136
• Resistance(2): Bollinger MP, 1.1138
• Resistance(3): 62% Current Wave, 1.1174

Bottom Line: It is anyone’s guess which way the EUR/USD is headed in the short-term, but the long and intermediate-term bearish trends are very much intact. If we see this pair rally during mid or late-week trade, then a short from macro Fibonacci resistance may come in to play.

As long as last week’s bottom remains a valid Swing Low (1.1051, not pictured), then a sell from just beneath the 62% Current Wave Retracement (1.1174) is a viable trade. Until elected, I will have sell orders queued up from 1.1172. With an initial stop at 1.1209, this trade produces 35 pips on a slightly-1:1 risk vs reward management plan.

ABOUT THE AUTHOR See More

Shain Vernier

US Analyst

Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.

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