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Euro Dollar – rangebound or on the move?


Currencies have not, on the whole, been trending as reliably as some other instruments of late. Many trend traders have instead been focusing on the indices and commodities for opportunities. However, in thorough market analysis and anticipation, potential opportunities may be stalked and pounced upon when they do occur.

The price of EUR/USD currently sits at a support level at 1.1700, shown on the monthly timeframe below. This level delineates the top of a range formed between January 2015 and July 2017 (marked in pink), the bottom of which is marked by the support level at 1.0500. If price breaks the current level to the downside, this will bring price back within this range, with the potential to move back down to the support level at 1.0500. This move could yield some selling opportunities for trend traders on a lower timeframe, such as the daily timeframe or an intraday basis.

Zooming in on the weekly timeframe, the price action can be seen, with lower highs leading down to the support level at 1.1700. The addition of the MACD and RSI indicators to the chart shows that if the support level were to be broken, there would be bearish convergence between price action and the indicators, suggesting there could be strong momentum to the downside.

On the daily chart below, the 10, 20, 50 and 200 moving averages (MAs) are not quite aligned nor showing suitable bearish geometry yet; however, if the horizontal level is broken and price continues downwards, the MAs should follow suit. Trend trading opportunities to the downside may not be far behind.

Drilling down to the four-hourly timeframe, a downtrend is established, with lower highs and lower lows in price action. The 10, 20, 50 and 200 MAs lined up and showing suitable bearish geometry. The horizontal level in question has broken, but not that convincingly yet. A pullback up to the level and a small to medium-sized bearish candle printing in this area could indicate the beginning of a further move down. With 300 pips down to the next level of support at 1.1400 and 1200 pips to the bottom of the range, the reward to risk on any selling opportunities along the way could be favourable.

Should the 1.1700 level prove too resilient, an alternative view is a move back up. Both MACD and RSI are showing divergence with the latest step down on the 4-hour timeframe. This could spark some buying to come back in with a target around the 1.1900 level.

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