Technical Review of EURUSD and Dollar Index
by Giuseppe Basile, aka FibStalker – FibStalkerTrading.com
The EURUSD pair has been moving laterally for the last 7-8 sessions. Mid November this market found participation in the 1.1700-20 area and pushed into the 123.6% of the previous Fibonacci retrace (50% at 1.7606) and hit target at 1.1932. After that price threw back into an area starting at 1.1836 (the following measured move higher) and within a “value area” – between the daily 10EMA and 30EMA – and since holding on top of that area and has continue to respect the long setup (Figure 1 below).
Should price in the EURUSD continue higher, the next target (not shown) is in the 1.2010-20 area. The alternate scenario is that price works out the area of support below price and then dips back into the 1.1780-1.1800 where there is another potential area of support that could bounce price higher once again. Therefore, in the alternate scenario the move in the Euro pair would seem very limited.
The Dollar Index Futures, which tends to trade opposite to the EURUSD (being the Euro an estimated 57% of the composite index calculation) is in a similar situation, but reversed, and bouncing against an area of resistance.
Figure 2 below shows the daily price of the continuous futures contract of the Dollar Index ICEUS Futures:
So far the Dollar Index has showed signs of reversing on top of the 50% Fibonacci long traced from the lows at the beginning of September. That area – starting around 93 – is showing support to price at the time of writing. Above current prices we can also spot a “value area” short acting as obstacle to higher prices. Clearing out that area, whose presence may suggest participation on short side, may require some time.
At the moment both bull and bear scenarios are still open and anything can happen. However support to the Dollar Index comes from a trace on a larger timeframe (weekly), when compared to the current long Fibonacci trace supporting price in the Euro, part of a daily sequence. For such reason it is our opinion that the Dollar Index bull scenario – which would imply a reversal of the Dollar Index on the upside, and a reversal of the Euro on the downside – seem to hold a better chances to materialize at this stage.
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