WWM - Analytics

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    Today’s Trading Edge: EUR/USD: Dollar crumbles as US economy shows signs of weakness

    WWM_EURUSD_FEB_3_2016.jpg 

    Long-term euro sellers are quickly evaluating their positions. The U.S. dollar suffered one its worst trading days since the Fed began its first QE program over seven years ago. The U.S. currency ignored a strong ADP report after the Fed’s Dudley, an FOMC voter expressed that financial conditions are tighter than they were at the time of the December meeting. When the ISM non-manufacturing report came out, the dollar rout was in full force. The service sector reading for January was 53.5, the lowest since February 2014.

    The EUR/USD daily chart is displaying that price is now trading above the 50-, 100-, and 200-day SMA(s). If the bullish move continues, the pair may not have any major resistance until the 1.1250 to 1.1300 region. It is around that area that price may form a bearish Gartley pattern. Point D is targeted with the 78.6% Fibonacci retracement of the X to A leg and the 161.8% Fibonacci expansion level of the B to C move.

    If we see the reversal pattern invalidated, we could see price target the 1.1400 area. If the Gartley pattern is valid, we could see a resumption of the longer-term bearish trend. Medium-term downward targets include the 1.0850 followed by the 1.0675 level.

    The trade: Sell EUR/USD at 1.1250, with a stop loss at 1.1300 and take profit at 1.1050. The risk/reward ratio is around 1:4


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