Forex Investment and Currency Trading

Analysis – Daily Chart
EUR-USD has traded in a very mixed manner over the last few weeks, but a renewed bout of weakness in the EUR is expected to unfold. The fact that the turn above 1.60 failed to hold in April is a useful bearish indication, as is the failed push above 1.58 over the last few trading sessions. A turn below the 08 May low at the 1.5290/80 is expected over the coming sessions, which will help to confirm the next leg lower. Use 1.5817 as near-term resistance now.

Analysis – Weekly Chart
The weekly chart shows a strong bull trend still in place, but the long-term momentum indicators are turning lower. The last few weeks have seen spot activity consolidate around the 13-week moving average (MA) and there should be some ‘mean reversion’ risk for a pullback to the 50-week MA (near 1.4612 now). The push above 1.60 in late April was not sustained and the weekly reversal pattern formed then warns of a potential long-term cap. Unless 1.60+ is breached again, the probability of 1.70 and 1.80 being hit should be lowered and a return to levels below 1.4950 is more likely, then to 1.40 below this.

Strategy – Three-Month View
A move in the EUR-USD below 1.4950 is seen as likely over the coming three months with 1.46+ (50-week MA) attracting. Clients should be short EUR-USD and looking to add on any corrective rallies.