EUR/USD Approaches 38% Retracement
Shain Vernier • 2 min read
It has been a modest open to the week for the EUR/USD and most of the forex. A sparsely populated economic calendar has produced muted trading conditions. Subsequently, back-to-back tight sessions have come to pass. Now, with this afternoon’s U.K. Parliamentary Brexit Vote tentatively scheduled, it appears that we may finally be in for some action.
Aside from the Brexit vote, this morning has already brought several U.S. economic data releases. Here is a quick look at the highlights:
Event Actual Projected Previous
Redbook Index (Oct. YoY) 4.3% NA 4.1%
Existing Home Sales Change (MoM, September) -2.2% -0.7% 1.5%
Richmond FED Manufacturing Index (Oct.) 8 -14 -9
Lately, the vast majority of U.S. metrics have come in beneath expectations. Today’s are somewhat positive, although the American real estate sector continues to struggle. The major increase in the Richmond FED Manufacturing Index (Oct.) is the headliner of this group. While it is not a primary market mover, the 17 point swing in the Richmond FED Index suggests a strong month-over-month boost in manufacturing. Perhaps this figure will promote a shift in FED policy at next week’s FOMC meeting.
For now, the daily uptrend in the EUR/USD is valid. Let’s dig into the technicals and see if there is a solid opportunity to buy in on a dip.
EUR/USD Falls Toward 38% Retracement
By far, today’s premier forex market driver is going to be the U.K.’s pending vote on Brexit. It has the potential to shake up all Eurozone currencies, as well as drive participation to the safe-havens. In the event we see bearish action hit the EUR/USD, a long scalp may set up for the U.S. late or overnight session.
Here are the levels to watch as we roll toward an all-important Brexit vote:
- Resistance(1): Spike High, 1.1171
- Support(1): 38% Current Wave, 1.1102
Bottom Line: As long as the Spike High (1.1171) remains the short-term top of the EUR/USD, a long scalp from the 38% Current Wave Retracement isn’t a bad way to get in on the action. Until elected, I will have buy orders in the queue from 1.1106. With an initial stop at 1.1094, this trade produces a fast 6-8 pips on a slightly sub-1:1 risk vs reward ratio.