Is The Euro Ready To Retrace?
The US dollar has increased against the euro with speculation of a euro-zone slowdown. US productivity in March was better than expected, which led to a USD rally against the euro.
The pound also fell against the USD as UK consumer confidence fell to a four year low in March.
“Market sentiment is shifting to a more positive outlook for the dollar. In the near term, there’s a real reason the dollar should strengthen on the back of weaker European data.” Camilla Sutton, Scotia Capital Inc., Toronto. - Bloomberg
The dollar increased to $1.5378, from $1.5532 yesterday against the euro, a rise of one percent. So what can we expect for the euro in coming days?
Technical Chart: EURUSD 1-hour
According to the 30-min, 1-hour, 4-hour and daily charts the EURUSD appear to be oversold or in the region of the 20 line on the slow stochastic which would indicate the Euro is reaching the bottom of the sell-off. Therefore, we should expect to see some growth in the Euro.
As the saying goes “The trend is your friend”, therefore, we can look for sell signals until the euro starts to see growth against the dollar for a longer time frame. Although the euro is oversold, any retracement may be small, whilst the overall trend continues to fall. This of course, wont be the case if we have reached the bottom for the euro.
Looking at potential sell signals around the 23.6% or 38.2% Fibonacci lines will give a stronger indication of further euro declines. However, notice the rising support line - if we see the euro break through the 38.2% line towards the 50% Fibonacci line, we may see the euro break the down trend and start to move up again.
But in the meantime, the safe trade would be looking for sell signals until a strong break of trend is seen.
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