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Today’s Trading Edge: EUR/USD: Falls to 1-month low on expectations for further ECB stimulus

WWM_EURUSD_MAR_1_2016.jpg

The euro weakened against its major trading partners as traders anticipate the ECB will announce additional stimulus at upcoming policy meeting on March 10th. Yesterday, the euro was unable rally following strong manufacturing PMI statistics. French manufacturing posted its 6th month of expansion, while Germany posted its 15th straight month and the Eurozone as a whole had its 36th month of expansion, but the lowest since April 2013.

The EUR/USD daily chart displays that the bearish selloff began after price formed a bearish Gartley pattern on February 11th. Point D was confirmed with both 78.6% Fibonacci retracement of the X to A leg and the 161.8% Fibonacci expansion level of the B to C move. Now price is also trending below the 50-, 100-, and 200-day SMA(s). If the bearish move continues, the pair may not have any major support until the 1.0750 to 1.0800 region. The psychological 1.05 handle remains the critical level that could open the door for a run to parity.

If we see price stabilize here, major resistance will come from both the 50- and 100-day SMAs, which currently trade 1.0973 and 1.0943 respectively.

The trade: Sell EUR/USD at 1.0925, with a stop loss at 1.0975 and take profit at 1.0775. The risk/reward ratio is around 1:3



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