The American equities and commodities markets have shown strength during the early going of the U.S. session. On the other hand, the USD is struggling to gain any ground against the majors. Losses vs the Euro, Swiss franc, and Australian dollar have highlighted the forex session.

Early August has been especially brutal for EUR/USD bulls, with price falling more than 100 pips during the initial trading week of the month. Bears have been in full control, posting a proximity test of the 1.1500 handle.

Today’s action has brought a change of direction and a test of a key topside resistance level. Let’s dig into the daily technicals and see if we can spot a trade or two.

EUR/USD Technical Outlook

Summer of 2018 has been an interesting technical study when it comes to the EUR/USD. The daily chart clearly shows us a period of consolidation between 1.1800 and 1.1500. This area is well below the yearly 38% retracement (1.1909), indicating that the prevailing long-term downtrend remains valid.

Here are the levels to watch for the near future:

• Resistance(1): 38% Current Wave Retracement, 1.1612
• Support(1): Double Bottom, 1.1510/1.1508

Bottom Line: Earlier in the session, the EUR/USD put in a test of the 38% current wave retracement (1.1612). This is a key level and one to watch as the week moves on. For the rest of the session, I will have sell orders queued up from 1.1612. Using an initial stop at 1.1626, this trade yields 28 pips on a 1:2 risk vs reward management plan.  

The vacant weekly economic calendar for the EUR/USD promotes the idea of extended rotation between the 38% retracement (1.1612) and the Double Bottom (1.1510-08). There isn’t a whole lot scheduled until Friday’s U.S. CPI release. Until then, fading the extremes by selling the 38% retracement and buying the Double Bottom is a solid way to play this market.