Which Way for the Euro’s Next Step?

Good Morning, Friends. To be honest, institutional FX trading this week has been very “August”; light volumes,  with plenty of players on vacation, and with those stuck at their desks – like me – spending their afternoons watching the Olympics. Normally, when we have sporting events on, we make the concession of keeping one of the large screens that surround the room tuned to CNBC;  yesterday, we gave up all pretense, as every screen was tuned to the womens’ soccer gold medal contest. 

So, while there’s no need to take the current price action entirely seriously as a harbinger of the next major moves – there will be plenty of political and central bank inputs come September – there is still a market, and today EUR/USD finally managed to reach, and even slightly exceed, the 1.2250 target that I suggested in my August 6 post. It still feels soft; on the daily chart, something around the lower Keltner Channel band, say 1.2150, looks like the next viable target, but it’s probably appropriate to take some risk off (and turn paper profits into the spending kind) right here.

It’s also appropriate to trail a stop down now; 1.2335 on the hourly chart looks as though it should contain most rebounds that aren’t headline-driven, and it strikes me as a decent place to preserve profits. I would expect to see some sellers now at 1.2300.  If I wasn’t already short, I’d be looking again at the daily chart, where the 50% retracement, or roughly 1.24, looks like a place that’s technically plausible, and it’s also the sort of “big figure” level that I would expect to attract other sellers.

Here’s hoping that everyone has had a good week; as Todd noted, we’ll expect to get a better read on sentiment as people return in early September. Best of luck.

About the Author Brian Keith


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