EUR/USD fractal outlook

[Paul Koszarny]

EUR/USD fractal outlook

Last week’s futile attempt to break above 1.0955 triggered a massive sell off towards major support 1.0726. On two occasions EUR/USD revisited the area below big figure 1.0700, yet further declines were stopped by demand near 1.0690 and eventually we did not see a test of 1.0654, a model retracement level of the two-week rise from 1.0498. Friday ended in a rather disappointing mode with positive divergences on RSI and stochastics on hourlies as well as H2 and H4 charts. From a mere technical point of view it is possible to have a movement upwards early Monday but this buying pressure, if seen, should dissipate at around 1.0794 which is not only daily resistance but also the attractor of a huge triangular formation bordered by 1.0913 from the upside and 1.0610 from the bottom. One quick look at USDindex suffices to notice that dollar positive environment may lead to test levels below the base of the triangle, namely levels nearing 1.0520 and in such a case I would expect it to be tested on Friday. The same calculation made for the other side of the graph gives the known extreme 1.1080 on assumption USDindex retests major Fibonacci extention at 97.60. However, the recent sharp reaction at 97.60 built a new support 99.05 which should hold in the course of over one month from now. The fractal daily model indicates Friday where a new local extreme may form, ideally a new low. EUR/USD will probably target 1.0555, and dips below it should be taken as excellent buying opportunities for a local rebound. Monday’s support comes at 1.0709, followed by 1.0665, not very strong lines, given the fact that after a loss of 1.0700 on weeklies EUR/USD will be made particularly vulnarable. I would not be surprised to see a two-month decline, though 9863 seems so remote now that almost unbelievable.

[Paul Koszarny]

EUR/USD had a very negative opening on Tokyo hours and following the bearish gap, the market was buying US dollars all across the board. EUR/USD reached 1.0576, the last obstacle before 1.0526. All major bourses are rallying today with quite a heavy volume, yet the volume indicates today's rally may be overextended and the market susceptible to aggressive selling near today's highs. EUR/USD is a little off its low. Bollinger bands widely open and stochastics extremely oversold on hourlies. The first model hour is at 12:00 with resistance 1.0610. We may see some consolidation around 1.0591.

[Paul Koszarny]

EUR/USD is slightly off its low 1.0561 during the first model hour. Stochastics present extreme oversold conditions in various time scales. The euro weakness is highlighted by numerous downward movements below the lower Bollinger band. Frenzy on equities and still a few hours to New York's opening left. The next model hour is only at 19:00.

[Paul Koszarny]

Stocks fever considerably lower, though still in a positive territory on major bourses but it was Wall Street that dragged the dollar and eventually made EUR/USD much higher from today's lows, first through 1.0665, then towards the lost Monday support 1.0709 on dailies and 1.0700 on weeklies. It all began on the first model hour at midday in extremely oversold conditions. As anticipated we have seen bifurcation on stock indices volume, a real threat to buyers at today's market levels and it will be natural to have local reversals on Tuesday. How much it will weigh on the dollar it's difficult to say. Below 1.0709/700 EUR/USD still hasn't filled the bearish gap. So we need to see an extra movement upwards to give up a thought of testing 1.0520 later this week. Roller-coaster volatility warns of wishful thinking that substitutes real stop losses.

[Paul Koszarny]

EUR/USD has already retraced 38.2% of the recent slide 1.0955-1.0555 with an eye towards half of it on 1.0760. The first model hour today is 14:00 and then we may be having very overbought conditions due to no profit taking visible right now. As anticipated the volume signals were sound and shortly after one hour of trading New York entered into a typical distribution phase of the market giving away most of its early gains. Strong correlation with stock indices made the dollar much weaker all across the board.

[Paul Koszarny]

The best moment to go long was on the indicated model hour 14:00CET when EUR/USD slipped briefly to 1.0650. We will probably see a movement towards 1.0760.

[Paul Koszarny]

It's been a different quality in the market for the last 10 hours. EUR/USD retraced 50% of the last fall but despite extremely overbought indicators on hourlies shows no slowing at all. The last Fibonacci retracement slightly above 1.0800 could be the next target. The nearest model hour is 13:00 with support 1.0750 and resistance 1.0807.

[robertfo]

Paul,

What time zone does your post refer to ie: GMT, CET, PDT? TIA