Key Forex Theme: Euro Weakness

So far this week the key theme in the FX market seems to be that of Euro weakness. The Euro has been weak for a number of months, however price had been consolidating for the last few weeks. Now it seems the Euro trend is set to continue as this week we have seen further moves to the downside. When we get a very weak currency, we generally see nice trending markets which are the types of markets we like to trade here at Trade with Precision. We are going to take you through a couple of the EUR crosses highlighting what we want to see to get positioned in these markets.

Let’s start with the most popular Euro cross, EURUSD. For the past 6 months EURUSD has been moving lower as you can see in the daily chart below. Most recently we have had a period of consolidation however we can now see that we have started to head lower again. The buyers who had been stepping into the market have been outweighed by the bears and the bears are now firmly in control of the market. Right now for us there’s no entry off the daily chart to join the trend short so we have drilled down timeframes looking for a possible entry point.

We have come right down to the 30 minute chart to look to time our entry short. As you can see below on the 30 minute chart the sellers are in control and we have a smooth downtrend underway. We have also drawn in a Fibonacci retracement from the most recent high to the low and we notice that the 61.8% Fibonacci level is clustering with the prior lows. If price can pullback to this level we would expect it to act as resistance which could provide us with a nice area to look to short this market. Make sure you keep an eye on prices reaction to this level.

The second cross we want to bring to your attention is EURNZD. This market has also been moving lower with some real force. Yesterday price broke down through the 1.48 level which was also the previous major low on the daily chart so it’s showing some real signs of weakness. You can see in the daily chart below how price had tested the 1.48 level a number of times and then how strongly price broke through that level yesterday. Again we will be drilling down to the lower timeframes to time a possible entry.

If you take a look at the 240 minute chart below you will notice that we are in a strong downtrend with nice smooth flowing price action. At the moment we are quite overextended from the sell zone (zone between the 10 and 20 period moving averages) so we would expect a pullback in price from here. Again we have drawn in a Fibonacci retracement from the most recent high to the most recent low and the 61.8% level clusters with the old lows and the major level seen on the daily chart. If we get a pullback to this level then that would act as a great place to be looking to gain an entry short.

Keep a close eye on the charts and levels we have discussed today to see how they play out in the coming days.

Happy Trading!

Regards,
The TWP Team