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Market Analysis

Technical analysis of EURUSD

September 11, 2019
BY Michael Stark

There is a continuing downtrend on the four-hour chart of the euro against the dollar (EURUSD). This comes as part of the larger downtrend on the daily charts. This movement seems to have lost some momentum since last week, though. Prices around 1.09250 last week were 28-month lows for this symbol.

The most important low support here is the long-term low around 1.09250. This appears to be a strong area: a bounce might occur if price moves down again in the near future. High support on this timeframe is less clear, but the psychological zone of 1.12 might be significant.

Technical indicators on EURUSD H4

The typical combination of 20 (from Bands), 50, 100 and 200-period simple moving averages indicates consolidation and sideways movement in the leadup to tomorrow’s news from the ECB. One can observe that price remains between the faster two MAs below and the slower two above. The death cross of the 50 and 100 SMAs towards the end of August came before the latest notable downward movement the following week.

Based on the behaviour on this chart, it’s possible that the 100 SMA might be an area of resistance which price has been testing. This might find strength from the presence of the upper deviation of Bands (20, 0, 2) in the same area. The 50 SMA has supported price since the end of last week. However, this would probably not be a very strong support amid the potential sharp movements around the news from the ECB. Narrow Bands indicate lower activity and volatility which is typical as important events approach.

The slow stochastic (15, 5, 5) is neutral, with both lines only very slightly above the midpoint. MACD (12, 30, 9) also suggests a lack of momentum with the signal line and histogram overlapping. On the whole, indicators give us a picture of consolidation. There is the potential for downward movement depending on the news from the ECB.

Price action and Fibonacci

A number of dojis and near-dojis since last week concurs with the picture of inactivity from indicators. Long wicks around the 100 SMA also might confirm this area’s importance as a resistance. The acute angle of retracement from lows early last week might reflect the high importance of 1.09250 as a support.

Fibonacci retracement here has been drawn based on the latest upward movement from the middle of last week. Extension has been drawn based on a combination of this and EURUSD’s losses in the last week of August. The 38.2% retracement is probably the most important area because of its presence close to the 50 SMA and the lower deviation of Bands. The 61.8% extension is likely to be a strong support into the end of this week at least.

Key data points

The European Central Bank meets tomorrow to decide on rates by 11.45 GMT. A press conference follows at 12.30. Events at the ECB will probably dominate trading for euro-dollar as well as a great many other pairs tomorrow. Expectations suggest a degree of dovishness from Dr Draghi, which might give some momentum to a resumption of losses for EURUSD. Whatever the outcome, traders must be cautious to manage capital conservatively around this crucial news.

Technical analysis EURUSD: summary

Lower momentum for euro-dollar before key meetings of central banks is quite typical. However, the failure to retrace more significantly last week might suggest that EURUSD could resume its long downtrend in the next few days. At any rate, traders should monitor events in Frankfurt tomorrow very carefully.

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