Strong Reversal In The EUR/USD

Posted Monday, August 26, 2019 by
Shain Vernier • 2 min read

“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.

EUR/USD, Daily Chart
EUR/USD, Daily Chart

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.

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