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FX: EURUSD Something Smells Fishy - Technical Up Fundamental Down

Interval: Daily

On the daily chart it is obvious that the uptrend is still in place. The last low did not get to 1.2665 and higher highs were made.

At this point things seem to get a bit confusing between the signals given by the technical analysis and the ones given by the fundamentals. Looking to compare the economies, we can say that for the moment USA’s economy is stronger and advances fast, and Europe doesn’t look to good.

Yesterday we saw that the European industrial production has fallen at -0.4% from 0.9% last month, meaning that the recession danger grows for this quarter. On the other hand the data published for USA was very good. Retail sales grew  0.9% from last month, hitting 1.1% and the import prices got to 1.1%. Today the Unemployment  Claims fell unexpectedly by 10.000 at 332k and the Producer Price Index has hit the expectations at 0.7%, up 0.5% from last month.

This very good USA publications strengthen the dollar, and sustaining the downtrend. EURUSD has touched today a three months low at 1.2980. The current fundamentals are saying still down.

The technical view is a bit different. It signals a possible reversal. The price got near a very good support zone formed of the 50% retrace of the full uptrend,  the 1.2878 support level and the base line of an older Inverted Head and Shoulders. The RSI 28, has drawn a small divergence. Price action signals fatigue from the sellers. All this might trigger a reversal, but we still need a confirmation.

The question is “What now?”. We have different directions given by the two types of analysis. My answer would be “wait and see“.

It would be difficult to pick a direction right now so it would be wiser to wait for confirmations. New publications and releases for the fundamental analysis. And for the technical we can wait for a close over 1.31 for bullish confirmation, or a close under 1.2876 (50%)  for a trend continuation.

FX: EURUSD Something Smells Fishy - Technical Up Fundamental Down by
Ordo Ab Chao
Ordo Ab Chao

!.2960 and 1.2925 are my topside and downside levels, breaks through either with strength will dictate my position, if I take one.

Ordo Ab Chao
Ordo Ab Chao 1 Like

I see the Euro possibly making a complete triangle formation, meaning further downside. However, I'm very cautious with this. If it shows strength breaking through a few small barriers to the upside it could go the opposite way. I think I may sit out and watch further action, even if it may cost me a few pips to do so. 

investazor moderator

@Ordo Ab Chao Sometimes is much better to wait for a confirmation. Momentarily neither the fundamental analysis nor the technical analysis signals a clear direction. As you said this consolidation might be tricky. The limits I mentioned are still in place, even though a false breakout was made under 1.2870.

Ordo Ab Chao
Ordo Ab Chao

@investazor @Ordo Ab Chao  Yeah, the big boys are going to knock out as many people as they can, considering they can influence fakes with massive selling or buying pressure. I will definitely wait for a clear signal. Can't catch me slippin' if I'm not participating :)