(MENAFN- DailyFX) consolidation break imminent Key range in focus heading into FOMC Check out our new projections in our Join Michael for Live Weekly Strategy Webinars on Despite the recent surge in volatility, Euro is virtually unchanged for the month of December with price continuing to trade within the confines of a multi-month consolidation range. These are the updated targets and invalidation levels that matter on the chartsheading into interest rate decision. Review this week's for an in-depth breakdown of this setup and more.
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EUR/USD Daily Price Chart Technical Outlook: In my latest our ‘bottom line' noted that the price had responded to, 'multi-month consolidation support and IF euro is heading higher, price would need to stabilize here above the 1.13-handle. From a trading standpoint, I'll favor fading weakness while above this threshold but ultimately a breach above 1.1443 is needed to suggest a larger advance is underway.
Euro briefly registered a low at 1.1270 before rebounding sharply with price continuing to respect the October consolidation range ahead of tomorrow's FOMC interest rate decision. Daily resistance stands at the 61.8% extension of the November advance at the 1.1426 confluence zone with a breach/close above the December opening-range high needed to suggest a more significant low is in place.
EUR/USD 240min Price Chart Notes: A closer look at price action shows Euro trading within the confines of an ascending formation extending of the yearly lows but it's still too soon to rely on heavily. Look for initial support ahead of 1.1337 with the recovery still viable wile above weekly open support at 1.13. Initial resistance at 1.1404 backed by the monthly high at 1.1443 a close above this level would expose subsequent objectives at 1.1472, the 100-day moving average at ~1.1490 and the 1.1515/24 confluence resistance zone.
A break below 1.1270 would invalidate the reversal play with such a scenario targeting the yearly low at 1.1215 backed by more significant support at the 61.8% of the 2017 advance at 1.1186. It's make-or-break for Euro heading into the close of the year.
Even the most seasoned traders need a reminder every now and then-
Bottom line: We've slightly adjusted the consolidation parameters to account for recent price action but ultimately, we're looking for a break of the 1.1270-1.1426 range for guidance with the broader decline vulnerable while above 1.13 near-term. From a trading standpoint, I'd be looking for a downside exhaustion near the lower parallel on a downside spike tomorrow. IF price fails ahead of the range highs, look for a break sub-1.1270 to fuel an accelerated drop in price.
As always, use caution heading into the FOMC tomorrow- Keep in mind that while the markets are broadly expecting a 25bps hike, the focus will be on the accompanying statement and updated economic projections. Tread lightly.
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EUR/USD Trader Sentiment A summary of shows traders are net-short EUR/USD - the ratio stands at -----1.16 (46.2% of traders are long) neutralreading Long positions are16.3% lower than yesterday and 11.5% lower from last week Short positions are 11.8% higher than yesterday and 18.9% higher from last week We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR / USD prices may continue to rise. Traders are further net-short than yesterday & last week and the combination of current positioning and recent changes gives us a stronger EUR/USD-bullish contrarian trading bias from a sentiment standpoint. See how shifts in EUR/USD retail positioning are impacting trend-
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- Written by , Currency Strategist with DailyFX
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