EURUSD Short Following Weekly Exhaustion Pattern
EURUSD rose relentlessly the past few months, but last week it struggled to move beyond a long-term resistance level by way of the 2010 low at 11876. It made a couple of attempts to trade above it but couldn’t hold onto those gains. Friday’s U.S. jobs report was enough to spark heavy selling, and in the process broke a rising wedge on the 4-hr and carved out a weekly reversal bar. This isn’t a call for ‘the’ top, but a period of backing-and-filling is in order. Looking to targets, the 2016 high at 11616 and trend-line rising up from April are in focus.
The US Dollar Index (DXY), which the euro makes up about 57% of in weighting, is trading in a major long-term support zone which dates back as far back as 1998. The most recent wave of selling has been the most persistent since topping back in the very beginning of the year. The intensified selling into support suggests we may have seen an exhaustion in the trend, and for a generally stronger dollar in the weeks ahead. It may only turn out to be a recovery bounce before eventually turning lower, but until oversold conditions are worked off the path of least resistance looks at this time more likely to be up for now.
US Dollar Index (DXY): Weekly