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Contributors Top Trade Idea For January 8th, 2014 – EUR/USD

forex_logoThe EUR/USD failed to react positively to the release of a much-stronger-than-expected eurozone retail sales figure, which showed an increase of 1.4% in November. It rose sharply from the 0.4% drop in October and easily beat expectations of a 0.2% gain. Meanwhile the unemployment rate in the single currency bloc remained unchanged at 12.1% as expected.

The lack of reaction from the bulls to such good data suggests the market may be positioned short. Indeed, from a technical point of view, it looks like the path of least resistance remains to the downside on the EUR/USD after it failed to hold above the old support level of 1.3650 on Tuesday.

Price had already created a reversal pattern on 26th December when it rose to an intra-day high of 1.3892 before closing the session much lower. Consequently it created a false break out pattern as it once again failed to hold above 1.3810 on a daily closing basis, with additional pressure coming in from a long-term bearish trend line at around 1.3890, and also a couple of Fibonacci levels between 1.3820 and 1.3835. These levels correspond with the 161.8% Fibonacci extension of June-July 2013 upswing and the 61.8% retracement of the 2011-12 downswing, respectively.

The EUR/USD is now testing a six-month-old bullish trend line around 1.3570/85, which may hold firm once again. However if it doesn’t, then price may head towards the 61.8% Fibonacci retracement level of the November-December upswing at 1.3520/5. It is also worth keeping an eye on the 100-day moving average (1.3535) which had offered decent support on several occasions in the past. The next downside targets could be 1.3420/5 – the 78.6% Fibonacci retirement of the aforementioned swing – followed by the 200-day average, currently at 1.3320/5. This bearish outlook however will become invalidated on a daily close above 1.3650.

14.01.08 EURUSD daily

 

EUR/USD Weekly

14.01.08 EURUSD weekly

About Fawad Razaqzada

frFawad is FOREX.com’s technical analyst based in London. He entered the FX market in early 2010. Having graduated from Brunel University with a degree in economics, and mentored by some of the industry’s leading experts, he has an excellent understanding of the fundamental drivers of the markets. But it is his unique ability to predict price moves using technical analysis that has made him popular amongst his peers. Fawad is regularly quoted in the leading financial publications such as the Wall Street Journal, Reuters, Market Watch, FT and Associated Press. On a day to day basis, Fawad produces and delivers market commentary and research for FOREX.com, with an emphasis on technical analysis. He achieved his CISI Level 3 Certificate in Investments (Derivatives – Retail) in early 2011.

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