Euro: USD/EUR (EUR=X) rebound hits resistance and stalls
The Euro-to-Dollar rate’s recovery has hit a roadblock and is stalling.
There is now a risk the pair could start to move lower again.
EUR/USD had been rising during the first week of October after posting new trough lows of 1.0879 on October 1.
Yet that recovery rally appears to have run out of steam now after reaching the 21-day moving average (MA).
MA’s often act as resistance lines on charts and the 21-day seems to be particularly good at resisting EUR/USD, having capped gains on several occasions in the past. In many ways its an ‘old enemy’ for Euro bulls.
“A cautious consolidation has set in on EUR/USD. However, the concern will be that this is playing out under the falling 21 day moving average (at $1.0990) which has previously been a good gauge within the downtrend channel,” says Richard Perry, a technical analyst at Hantec Markets.
Perry sees a risk the pair will start a new cycle lower.
The fundamental cause as increasing pessimism over the outcome of trade talks between the U.S. and China set to kick off this Thursday.
“The risk certainly seems to be growing to the downside once more. Momentum indicators are rolling over around similar levels as previous bear rallies have failed too,” says Perry.
The small range of the past few days, especially between the daily open and close price is another warning sign the market could be peaking.
“Small bodied candlesticks reflect a lack of conviction in the market now, with the US/China negotiations clearly a factor,” says Perry, referring to the Japanese candlestick charting method which represents days graphically as ‘candlesticks’.
Yet overall Perry sees the market as characterised by a ‘lack of conviction’ to a certain extent in any direction – with a risk still remaining the up-move could resume too.
Indeed the pair is 0.25% higher on the day at the time of writing showing bulls are not yet completely out of the game.
“This is still a market lacking conviction, as the euro has ticked slightly higher into the European session,” says the market analyst.
Nevertheless, the inability of the market to hold above 1.1000 and its rebuttal by resistance from the upper boundary of the falling channel is not a very positive sign, and suggests bears have the edge overall.
“The downtrend channel is falling at $1.1015 today (between the $1.1000/$1.1025 resistance band) meaning the barriers to gains on EUR/USD are quite considerable now,” says Perry.
If further downside continues there is support at 1.0940, and a break below 1.0925 “opens the $1.0875 recent low.”
“The bulls have their work cut out to prevent another near term rebound being sold into,” says Perry. “Below $1.0940 would begin to drive negative traction for $1.0875/$1.0900.”
Overall, the bias in prices is: Downwards.
By the way, prices are vulnerable to a correction towards 1.11.
The projected upper bound is: 1.11.
The projected lower bound is: 1.09.
The projected closing price is: 1.10.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 21 white candles and 28 black candles for a net of 7 black candles.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 52.7274. This is not an overbought or oversold reading. The last signal was a buy 7 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 46.48. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 27 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 39. This is not a topping or bottoming area. The last signal was a buy 6 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 4 period(s) ago.
Rex Takasugi – TD Profile
FOREX EUR= closed up 0.000 at 1.097. Volume was 99% below average (consolidating) and Bollinger Bands were 14% narrower than normal.
Open High Low Close Volume___
1.097 1.097 1.097 1.097 553
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 1.10 1.10 1.12
Volatility: 4 6 6
Volume: 62,623 78,887 106,251
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX EUR= is currently 2.2% below its 200-period moving average and is in an downward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of EUR= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on EUR= and have had this outlook for the last 67 periods. Our momentum oscillator has set a new 14-period high while the security price has not. This is a bullish divergence.