Short term
Trade view / 29 August 2016 at 0:40 GMT

EURUSD: Plenty of downside potential ahead

Managing Director / Technical Research Limited
New Zealand
Instrument: EURUSD
Price target:
Market price:

The US dollar will start the week on a roll after reversal day on the major crosses on Friday, spurred along by comments from the US Federal Reserve Chair Janet Yellen and Deputy. But two key data points will determine whether the rally can gather any momentum: July’s PCE inflation numbers (out today) and the July employment (Friday). 

The inflation update won’t raise any pulses, but hopes are high for a 180,000-200,000 jobs added number which would be enough to see the unemployment rate drop again to 4.8%, thus confirming the “solid performance” of the labour market. 

ECB big hitter Benoit Coeure was also attending the Jackson Hole symposium and he suggested monetary policy still had an easing bias in the Eurozone. The flash estimate of inflation for August in Germany on Tuesday and for the Eurozone the day after should shed some more light on that situation.

Management and risk description

From both Elliott Wave and classical charting perspectives, the euro is interpreted as having significant downside potential in the days, weeks and even months ahead. As always of course, this will require constant monitoring and technical re-evaluation to optimise trading opportunities (which I will be doing).

In the context of the Elliot Wave principle, it is tenable to interpret the completion of EURUSD’s broad Wave IV/ Triangle correction (see weekly and daily charts below) whilst from a classical charting stand point, EURUSD displays a (potential) developing 6-month Head and Shoulders reversal formation (see daily chart below).

In the short term, resistance now lies at 1.1215/1.1240 for sell-off towards the low 1.1100s en route to 1.1050 (initially).


Entry: EURUSD is seen as a sell today at 1.1215/1.1240.

Stop: 1.1264, initially. 

Target: 50% at 1.1126 and 50% at 1.1067.  

Time horizon: Allow several days for targets to be met.  

EURUSD daily chart (click to expand)
EURUSD daily chart
Source: ThomsonReuters  

EURUSD daily chart (click to expand)
EURUSD daily chart
Source: ThomsonReuters  

EURUSD weekly chart (click to expand)
EURUSD weekly chart
Source: ThomsonReuters. Create your own charts with SaxoTrader; click here to learn more.  

— Edited by Susan McDonald

Non-independent investment research disclaimer applies. Read more
Ali Baba Ali Baba
excellent analysis Max
abach abach
What will a stronger dollar mean for the rate hike? And also considering that the ECB does not want a weaker euro and the FED does not want a stronger USD...
Max McKegg Max McKegg
The Fed has often mentioned the dollar as a reason for low inflation and so, after today’s flat PCE numbers, they will back off any suggestion of rate hikes if USD rallies too far. As for the ECB, they are in a similar position. As this chart shows, there is a good correlation between the EUR TWI and inflation expectations. They want/need EURUSD to come down.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail