EUR/USD

Breaking Down The Weekly EUR/USD Chart

Posted Saturday, September 22, 2018 by
Shain Vernier • 3 min read

The past five sessions have been kind to backers of the EUR/USD. Rates have rallied nearly 125 pips, closing Friday’s trade very near the 1.1750 handle. If you went long last Monday, it was an exceptional week and a great way to roll into the last trading days of September.

Dominating the headlines of the next few days will be the U.S. Federal Reserve (FED). Chairman Jerome Powell is expected to raise the Federal Funds Target Rate by 25 basis points on Wednesday, to 2.25%. This is to be Powell’s third rate hike as FED Chair, with another possible in December. At press time, the odds of a fourth 2018 rate hike have fallen a bit. The CME FedWatch Index is estimating a 78.4% chance of rates going up in December, down from mid-week measures of more than 80%.

From a trading standpoint, Friday brought choppy price action to the EUR/USD. After a bullish break on Thursday, traders elected to take profits ahead of the weekend, prompting a retrace. What does the early FED-week trade have in store for the Euro and Greenback? Let’s check out the weekly chart for the EUR/USD and nail down this market.

EUR/USD Weekly Technicals

At the moment, we have numerous technical indicators converging on the EUR/USD weekly chart. The recent rally has brought strong topside resistance into play, challenging the long-term downtrend.

EUR/USD, Weekly Chart
EUR/USD, Weekly Chart

Perhaps the most important bit of information on this chart is the pending Bollinger MP/Weekly SMA crossover. If the crossover develops on Monday’s open, it will be the first time since late April this has occurred. The last Bollinger MP/Weekly SMA crossover marked the beginning of the Greenback’s 2018 run against the Euro. Will this one signal the end of the prevailing yearly bearish trend?

Here are some of the macro levels to watch for FED week:

  • Resistance(1): 38% Retracement of 2018’s Range, 1.1780
  • Resistance(2): 50% Retracement of 2018’s Range, 1.1929
  • Support(1): 38% Current Wave Retracement, 1.1611 (Not Pictured)

You will notice that I left out the Bollinger MP and Weekly SMA levels. I did this because they will be recalculated on Monday’s open. For using these indicators on a weekly time frame, it is best to wait until Monday’s session is in the books before referencing price levels. Be sure to check the Comments section below for these numbers once they become available.

Overview

It is difficult to stress just how important the 38% retracement of 2018’s range (1.1780) really is. If this area holds, then the prevailing trend remains intact. If not, we are entering correction and a return to 1.2000 becomes highly probable.

The FED raising rates on Wednesday is pretty much a foregone conclusion. However, Powell’s speech in the aftermath is going to be key. There are some big issues facing the U.S. economy right now. The U.S./China trade standoff, restructuring of NAFTA, rising energy prices, and the coming U.S. Congressional Midterms elections are just a few.

The markets are going to be watching Powell’s comments very closely, looking for any clues of uncertainty or a shifting FED dynamic. Be on the lookout verbiage like “flexible,” “fluid,” and “reflexive.” These types of words will signal that the FED may be rethinking their current stance of gradual tightening, leaving the door open for more dovish policy. We will cover this concept in-depth as the FED meeting nears.

It is going to be a great week on the markets. The electronic open is a little over a day away. Rest up and get ready for what should be an outstanding five-session run on the forex. Remember, next week is always the best week!

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About the author

Shain Vernier is our 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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