Early in NY, the euro initially fell around 30 pips to the dollar after the highly anticipated retail sales release hit expectations and had a positive revision for the June release. Retail sales for the month of July grew 0.6%, while the prior month was revised to 0.2%.
The EUR/USD daily chart is displaying the formation of a bearish ABCD pattern that has signaled a key reversal that is currently testing the 50-day SMA. In addition to the bearish reversal pattern price is also respecting the July 10th high. If we see downward pressure recapture the 1.10 handle, we could see momentum target another run towards the 1.08 handle.
If we do see price climb over the 1.12 zone, we could see a short squeeze support a move higher towards 1.1325. Major resistance will come from the 200-day SMA, which is currently trading around the 1.1377 level.
The trade: Sell EUR/USD at 1.1125, with a stop loss at 1.1175 and take profit at 1.1025. The risk/reward ratio is 1:2
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading