Daily 38% Fibonacci Retracement In View For The EUR/USD
Shain Vernier • 2 min read
June has been a positive month for the Greenback as U.S. inflation and Fed policy chatter have spiked forex action. Amid the evolving fundamentals, the USD Index has established itself above 91.50. Although the Greenback’s June bounce may turn out to be short-lived, it has been a welcomed reprieve for EUR/USD bears.
During this morning’s U.S. premarket hours, there were a few key metrics released to the public. Here are the highlights:
Event Actual Projected Previous
Continuing Jobless Claims 3.390M 3.470M 3.534M
Initial Jobless Claims 411K 380K 418K
Core PCE Prices (Q1) 2.50% 2.50% 1.30%
Durable Goods Orders (May) 2.3% 2.8% -0.8%
GDP (QoQ, Q1) 6.4% 6.4% 4.3%
The two headliners of this group are the Q1 GDP figures and Q1 Core PCE Prices. If nothing else, these items affirm that the U.S. is in an expansionary, inflationary cycle. While this is a positive thing in the short-run, one has to wonder when the American economy will threaten to “overheat” and force the Fed to abandon unlimited QE policies. For now, the markets believe the Fed will stay the course as the CME FedWatch reads a 0% chance of a ¼ point rate hike until March 2022.
The EUR/USD is holding in daily bearish position. However, the tides may be turning as forex players look toward July’s Fed meeting.
Key Fibonacci Resistance Level In Play For The EUR/USD
The daily chart below gives us a good look at the state of the EUR/USD. Rates are beneath the current wave’s 38% Fibonacci retracement (1.1962) and within striking distance of June’s low (1.1847).
Bottom Line: Thus far, the EUR/USD has tested the 38% retracement on two occasions and failed. For now, a bearish bias is warranted as rates set up in a pronounced “L” formation.
If we see another test of the 38% retracement, a short scalp trade may come into view. Until elected, I’ll have sell orders in the queue at 1.1954. With a tight initial stop loss at 1.1966, this trade produces 12 pips on a standard 1:1 risk vs reward ratio.