EUR/USD may be Ready for a Move Higher

Is the 3rd time a charm for the 1.1170 level?

On October 24th, Mario Draghi led his last ECB meeting, in what was mostly a “goodbye moment” to the markets.  There weren’t any surprises, and Draghi left the helm to Christine Lagarde.  At the time, we discussed the possibility of EUR/USD pulling back towards 1.1000 before making a move higher.  The main reason to look for the move was that EUR/USD was trading near the 200-day moving average, downward sloping trendline resistance, the 61.8% Fibonacci retracement from the June 25th high to the October 30th low, and the RSI near overbought conditions.  With the help of the positive trade news between China and the US over the next month, the US Dollar Index (DXY) moved higher and the Euro moved lower towards that 1.1000 level.

Source: Tradingview, CityIndex

However, over the last few days (see 240-minute chart), DXY began trading lower and failed to take out the double top target.  Price gapped lower into support after the weekend and the tweet this morning that China may be stalling on the trade deal was the final nail in the coffin to push DXY below the support zone towards 97.75.  (One thing I’d like to note here is that the RSI is in over sold conditions.  This is a place to begin to use the RSI to look for a reversal.  It doesn’t mean there will be a reversal.  There is no reason the RSI can’t go further into oversold territory or unwind while price trades sideways).

Source: Tradingview, CityIndex

As one may have expected, on a 240-minute chart EUR/USD failed to reach a double top target as well (however came much closer than DXY).  Price has reversed and is bouncing back towards the confluence of resistances mentioned on the daily chart.  EUR/USD has paused at the 50% retracement from the highs on November 4th to the lows on November 14th near 1.1089.   (Note the RSI here as well.  Same situation as with DXY, but opposite).

Source: Tradingview, CityIndex

What now for EUR/USD?  If price can continue higher from here, the double top resistance highs come in at 1.1170, along with the 200 Day Moving Average and the downward sloping trendline heading back over a year.  Is the 3rd time a charm for the 1.1170 level?  If price breaks through 1.1200 the next resistance level isn’t until 1.1400.  Support is back down at the 1.1000 level.

This week, ECB President Christine Lagarde speaks and Eurozone Markit Manufacturing PMI’s are to be released.  There will probably be more comments regarding the US-China trade war as well .  Any of these events may act as the catalyst to determine the next direction for EUR/USD.

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