EUR/USD Technical Analysis 20 March 2017 - Too Many Dollar Bulls

EUR/USD spot: 1.0771

Support: 1.0720, 1.0680, 1.0625

Resistance: 1.0795, 1.0825, 1.0960

Strategy:

  • Longer term: Sell on a break below 1.0720 with a stop at 1.0825. Take profits at 1.0620, 1.0495 and 1.0350.
  • Short term: Sell below 1.0795 with a stop above 1.0825. Take profits at 1.0720 and 1.0680.
  • Switch bias to long above 1.0825

News Flow Stacking up Against the Dollar

The Dollar fell the most in five months as European politics and a slightly less hawkish Fed statement caused USD bulls to liquidate positions.

In Dutch elections, the right-wing populist Geert Wilders fell short of expectations. The risk of a move towards protectionism is now seen as dissipating which is positive for the Euro. The Fed raised rates as expected, but did not hint at accelerating the tightening cycle which traders were anticipating. This left dollar bulls with little reason to hold onto long positions in the short term. Euro rallies have been driven by the fact the nearly all sentiment indicators indicate the market is long Dollars and short Euro, while the news flow has done little to support this view.

There is very little scheduled news or data flow of significance on the horizon, though there are a number of announcements that could be made at any time. Markets will be looking for the UK Prime Minister to trigger article 50 beginning the formal Brexit process. In the US news on budget, tax and healthcare issues could impact the USD at any time.

Is the Euro rally almost over?

On the longer-term charts, the Euro is overbought, close to resistance, and likely to fall back toward 1.05. The possibility of a move to parity is unlikely unless we see enough dollar bulls give up – the market is just too long of USD for such a big move. The 1.0825 level is the major level to watch for signs of further strength in the Euro, though this would require a shift in fundamentals.

2017-03-20-eurusd-weekly-chart

EUR/USD Weekly chart

Looking for a reversal

On the four-hour chart, the Euro is in a clear bull channel, with multiple resistance levels about to come into play. The 1.0795 level is the top of the channel, and the 1.0825 level is longer term horizontal resistance level. Aggressive traders can sell into strength using the 1.0825 level as a stop, while more cautious traders can wait for a reversal pattern to form.

2017-03-20-eurusd-4h-chart

EUR/USD 4-Hour Chart

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