The EURUSD pair was the star of the previous month’s price action. It rose unabated until above 1.19 and only retraced in the last trading day of the month.
Since March, it gained ten big figures – an impressive move for a pair known for its long-term consolidation levels. Both technical and fundamental factors helped the EURUSD on its move higher.
On the fundamentals side, the EU Summit gave the green light to common debt sharing in the European Union. The decision boosted investors’ trust in the Euro and the European project. Moreover, the European Central Bank (ECB) is viewed as one of the central banks with the most proactive attitude during the coronavirus pandemic. Furthermore, despite the recent surge in the number of coronavirus cases in Europe, the old continent is viewed as better-handling the pandemic than the United States.
On the technical side, the EURUSD’s appreciation came without a pullback. Since the June ECB Meeting, it only consolidated for a couple of weeks around 1.12-1.13 area before exploding higher. The recent price action all the way to 1.19 happened so fast and aggressive that many retail traders were taken by surprise.
At this point, the EURUSD looks weak. After reaching above 1.19 it came down over a hundred pips last Friday.
In doing so, it broke below the rising channel that accompanied the pair on its way higher. Moreover, before doing so, it met dynamic resistance against a rising trendline.
The EURUSD rejection should continue until at least the lower edge of the bigger channel. To trade it at market, place a stop-loss order above the 1.19 highs and target below 1.16. While not a great risk-reward ratio, it offers the possibility of trading the EURUSD’s break lower after such a strong trend higher.
From an Elliott Wave point of view, this may be the b-wave of a double combination, one that usually ends with a triangular pattern.
