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EURUSD: pair technically ready for a correction

Previous:

On Tuesday the 14th of August, trading on the euro closed down. After a correction to 1.1429 during US trading, the EURUSD pair dropped to 1.1320. The euro lost ground against the dollar despite the fact that the Turkish lira has stabilised. The lira gained 11% against the dollar.

Traders shorted the euro on the back of the uncertainty over Turkey’s situation and how it will affect the financial solvency of a few European banks as well as the US dollar rising across the board.

Day’s news (GMT 3):

  • 11:30 UK: CPI (Jul), PPI - input (Jul), PPI – output (Jul).
  • 12:30 UK: retail price index (Jul).
  • 15:30 US: retail sales (Jul), nonfarm productivity (Q2), unit labour costs (Q2), NY Empire State manufacturing index (Aug).
  • 16:15 US: industrial production (Jul).
  • 17:00 US: NAHB housing market index (Aug).
  • 17:30 US: EIA crude oil stocks change (10 Aug).
  • 19:00 Germany: German Buba president Weidmann speech.
  • 23:00 US: net long-term TIC flows.

Fig 1. EURUSD hourly chart. Source: TradingView.

Current situation:

My predictions for yesterday came off in full. The rate dropped from the balance line past the 67th degree to reach 1.1330.

The formation is complete on the hourly timeframe. I haven’t been able to choose a scenario today because the pair has reached a support on the daily timeframe and the 112th degree, which is sitting below it at 1.1301, is a potential reversal level. Moreover, in today’s Asian session, all the majors are trading down. The picture on the euro crosses is mixed. Some pairs are trading up and others down.

I can only tell you my thoughts on what’s happening today:

  1. The pair will consolidate between 1.1320 and 1.1360 before a drop occurs.
  2. On the hourly timeframe, there’s a divergence between the AO indicator and the lows of 1.1365 and 1.1320. The conditions for an upwards correction have been fulfilled.
  3. As trading gets underway in Europe, the downtrend could take us as far as 1.1301. There’s no guarantee that the drop will end there.

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