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John J Hardy
Saxo Bank’s head of FX strategy John Hardy takes a closer look at trends and moves in today’s forex charts, including EURUSD, USDJPY, AUDUSD, and EURSEK.
Article / 01 August 2017 at 13:04 GMT

Why EURUSD could run to 1.25

Technical Analyst / Saxo Bank
Denmark
  • EURUSD could be headed for 1.25 
  • Resistance at 1.20 not particularly firm
  • RSI was rejected at the 60 threshold

EURUSD
Bears on the defensive... Photo: Shutterstock

By Kim Cramer Larsson

Sometimes things move faster than expected. When I predicted in late June that EURUSD would climb to at least 1.17, if not 1.20 or higher in the longer term, I did not expect the pair to move this fast. After all, it was trading around 1.13 back then.

A potential triple bottom-like pattern (ideally the first bottom should be the lowest, but this is nevertheless a triple bottom) was confirmed in July after a break above the falling trendline (see purple line on chart below). Further upside potential was confirmed when we closed above the highest peak in the pattern's valleys, which occurred at yesterday's July close. 

From here there isn't really any major resistance before around 1.20, and even that level is not all that strong. Looking at the chart, 1.20 is not resistance merely because it is a nice round number; EURUSD previously found support around this point back in 2008-2012. 

It didn't, however, offer much support in 2014... but the 55-month moving average currently is around that level as well, and could offer some resistance of its own.

As the 1.20 level isn't all that strong, EURUSD will probably not see much resistance before testing the 200-month moving average, which has historically offered both support and resistance. Another major area to keep an eye on is the long-term falling trendline going back to the 2008 all-time high. 

Where it could or will hit the trendline is not easy to answer as its falling, but I have tried to draw a possible move on the monthly chart (green and red lines) and confirmation of the triple bottom pattern gives a potential price target between 1.24 and 1.28.

The correction area could very well occur between the 55- and 200-month MAs, which would then serve as the fourth wave of a classic five-wave scenario.  

The Relative Strength Index was rejected at the 60 threshold, meaning it is still technically bearish (RSI has been bearish since 2010).  A close above this point, however, would confirm the bullish picture.

EURUSD (monthly):
EURUSD
Source: Saxo Bank

— Edited by Michael McKenna

Kim Cramer Larsson is a technical analyst at Saxo Bank
2y
aspen aspen
a few fibo numbers - 05.05.14 =1,3995 high, 02.01.17= 1.0340 low, 0382 = 1.1736, 0,50 = 1.2176 and 0.618 = 1.2599 --- here we meet your price target between 1,2400 and 1,2800--
2y
Morris Morris
Noted is bullish dvgce @ lows of 2015 and 2017. I very support the count and see the 2017 impulse wave as Wave 1 with subwaves. In short well articulated. Thanks

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