Slow U.S. Open: Spotlight On EUR/USD, USD/CAD
Shain Vernier • 2 min read
Last Friday brought us some red-hot markets to trade. Today is the opposite, as we are seeing tight ranges across the board. Slow markets can be frustrating to trade, featuring choppy price action and too many fake-outs. Implementing tight risk controls, as used in a scalping strategy, may be the best approach.
There is not much on the news docket for today's U.S. session. The highlights were the release of the Labor Market Conditions Index for July and the upcoming FOMC member Kashkari’s speech at 1:25 PM EST.
My colleague Skerdian covered the key technical levels for the EUR/USD in depth earlier in the European session. I have a few thoughts to add, but the prognosis is the same: the EUR/USD's intermediate-term bullish run is showing signs of a slowdown. Confirmation of reversal may be coming in the near future.
Daily EUR/USD Chart-Rotation After Friday’s Fireworks
Here are a few technical aspects of this market to be aware of:
Friday’s low of 1.1727 was a test of the 62% Fibonacci retracement. For me, Fibonacci retracements play a big role in trend identification and determining trade location. If the EUR/USD trades under Friday's low, that is a big sign the bull run is over.
The swing high of 1.1908 is a key number to the top. If we see a rally from here, there will be heavy action between 1.1908-1.1900.
The sustained selling from Friday’s session was news driven. Today, we are seeing rotation as the market decides which way to go. There is no point to force a trade. While the overall trend is bullish we are seeing some signs of exhaustion.
The USD/CAD is officially showing some strength. It is possible that the three-month downtrend could be over.
USD/CAD Daily Chart- Turning Bullish?
The USD/CAD is in a position to extend its winning streak to six sessions. That is the longest since May.
Earlier this session we saw a test of July’s 50% retracement. The next topside resistance is 1.2784 at 62% of July’s range.
The USD/CAD is currently trading above the 13 period SMA. This is a large development and signals the potential end of the macro trend.
Today has brought a crossover between the midpoint of the Bollinger Bands and the 13 day SMA. Again, I place emphasis on this development. It is the first crossover since May 17, which marked the beginning of the downtrend for the USD/CAD. The winds of change are blowing for the USD/CAD.
Bottom Line: Remember that we are just getting started for the week. Slow markets give us a chance to brush up on our analysis. For now, I am watching these two pairs with interest. As the trading week moves forward, optimal trades will present themselves.