How to Trade EUR/USD Today

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How to Trade EUR/USD Today

In order to get to a forex trading party and come back safe-and-sound, you need a forex car with its four wheels rolling properly. The necessary wheels for forex trading include Technical Analysis, Fundamental Analysis, Sentimental Analysis, and Intuition.

Technical Analysis

To get a better idea of the market, it is best to zoom in different time-frames.

Monthly Chart

EUR/USD has been trading in a downward channel which could be taken as an overall long-term down-trend. Currently is it approaching the all-time low of June 2010 at 18.93. A break below this level will open doors for further drops. The Euro zone authorities are trying are keep the euro from reaching this support level.

Weekly Chart

The weekly candles are in an obvious downtrend and have broken all the previous support levels. The pair has been scratching the lower band in the past weeks so it could be suggesting that the pair has been oversold, giving us a “buy” signal.

Daily Chart

On a daily basis, EUR/USD’s consolidation from 1.2389 is still in progress and intraday bias remains neutral for the moment. Since on the larger time frames there are signs of a reversal, a Fibonacci research could help us understand the market better. Today the market is already testing the 50% Fibonacci retracement and chances are the pair will move up to the 61.8. Either way, this could be an intraday sell opportunity.

4-hour Chart

A short term bottom is formed at 1.2042, on bullish convergence condition in 4 hours MACD. Hence, we’d stay bullish as long as 1.2042 support holds and expect further rally ahead. Above 1.2336 minor resistance will turn bias back to the upside for 1.2747 (50% retracement of 1.3486 to 1.2042 at 1.2764).

Fundamental Analysis

The ECB Governing Council decided to keep the main interest rate at a record low of 0.75% at their August monetary policy meeting. During the subsequent press conference the ECB head Mario Draghi commented on the considerations underlying the decision.

The euro declined after Draghi’s remarks, but speculation has arisen that this decision would be a sign that further nonstandard measures were on the verge of being announced today. Therefore, we are in wait-and-see mode as far as fundamentals are concerned.

Sentimental Analysis

The EURUSD has faced downside pressure the past several days, setting a series of lower highs and lower lows since Friday’s failed run up to 1.2400. This could be a corrective Bull Flag, in which prices will break higher towards 1.2600. Alternatively, it could be a topping pattern which needs a fundamental catalyst to be pushed lower. The ratio of long to short positions in the EURUSD stands at 1.06 as nearly 51% of traders are long. This ratio also puts us in a wait-and-see mode.

Intuitional Analysis

Having done all the analysis above, different viewpoints are giving me altered market movement signals, therefore I wouldn’t place a trade today. However, my intuition tells me that the euro will see a short-term rally.