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Ian Coleman, of First4Trading.net, explains in a technical chart analysis why he is trading EURUSD. He is selling at 1.0640 with a stop at 1.0680. His target is at 1.0450.
Short term
Trade view / 25 July 2016 at 12:31 GMT

Hawkish FOMC statement could crush EURUSD

FX Consultant / IFXA Ltd
Canada
Instrument: EURUSD
Price target:
Market price:
Background

The EURUSD rally that was intact since December is no longer. The post-Brexit plunge below 1.1150 saw to that. Since then, EURUSD has consolidated within a 1.1000-1.1190 band but the bottom is showing signs of wear, warning of additional losses. 

Last week, the European Central Bank left rates unchanged and delivered a balanced but cautious statement, expressing concerns about Brexit and slowing global growth. On Thursday, the Federal Open Market Committee may deliver a more upbeat assessment on the US economy and set the stage for a September rate hike. 

 A June rate hike was on the agenda, but Brexit and a wonky nonfarm payrolls report derailed the move. Since then, the payrolls report corrected itself. The two-month NFP is 150,000 and recent US data have been stronger than expected. 

Last week, existing home sales posted their largest gain since 2007, housing starts were near eight-year highs, and jobless claims declined. It stands to reason that this FOMC statement will be hawkish.

The intraday EURCAD technicals are bearish while trading below 1.1020 with prior support at 1.1040 now reverting to resistance. A break of the 61.8% Fibonacci of the December-May range (1.0940) points to further losses to the 76.4% retracement level.

Management and risk description 

This trade is vulnerable to weaker than expected US data this week including Durable Goods on Wednesday. Continuation of the strong earnings reports from US corporates will help keep the US dollar in demand. The stop loss will get triggered on pre-FOMC sentiment of another dovish FOMC statement.

Parameters

Entry: sell EURUSD at market (1.0983).

Stop: 1.1065.

Target: 1.0790.

Time horizon: four days.

EURUSD 30 minute with stop loss level shown:
eurusd
Source: Saxo Bank 

EURUSD one-hour with downtrend channel:
eurusd
Source: Saxo Bank 

EURUSD daily with Fibonacci retracement levels and take-profit levels noted:
eurusd
Source: Saxo Bank 

EURUSD five-year daily with moving averages:
eurusd
 Source: Saxo Bank 

— Edited by Michael McKenna

For more on forex click here.

Non-independent investment research disclaimer applies. Read more
26 July
HaythamSabry HaythamSabry
Hi Michael, do you still recommend this trade?
26 July
Michael O'Neill Michael O'Neill
Yes, but with less enthusiasm. I think that the stop loss should probably be lowered but I'm still thinking about it
26 July
HaythamSabry HaythamSabry
would appreciate if you could let me now. Thanks
26 July
Michael O'Neill Michael O'Neill
For sure.
26 July
Michael O'Neill Michael O'Neill
TRADE IDEA UPDATE: Their hasn't been a whole lot of interest in selling EURUSD yesterday or today. The price action suggests that a modestly hawkish statement would be a surprise which if correct means EURUSD would drop. However, thats merely a guess and the current price suggests that it is not a preferred scenario.

Close 1/2 the position at the market (Currently 1.0987, booking a tiny .0004 point loss and lower the stop loss to 1.1036.
27 July
andywielkiszu andywielkiszu
Hi Michael. Do You still have this position?
27 July
Michael O'Neill Michael O'Neill
Yes but, I closed 1/2 the position and lowered the stop to 1.1036. Now its up to the FOMC
27 July
andywielkiszu andywielkiszu
Ok. Thank You very much!
27 July
Estuardorlemus Estuardorlemus
Keep us updated Mike !! Thanks

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