On Tuesday the 4th of September, trading on the EURUSD pair closed slightly down, although the rate dropped as far as 1.1530 during the US session. The pair hit a new low after a strong ISM manufacturing PMI report for the US. The index came out at its highest since 2004. The value for August was 61.3 against a forecast of 57.6 and a previous reading of 58.1.
I reckon that the euro’s decline gathered pace following the breakout of the support at 1.1594 (trend line of the upwards correctional movement) and the triggering of protective stop levels below this level and the 1.1585 low. By close, the euro had recovered to 1.1586. Including this morning’s growth, buyers have now recovered all the losses incurred yesterday.
Day’s news (GMT+3):
Fig 1. EURUSD hourly chart.
I wasn’t prepared for the euro’s decline yesterday, so I kept an eye on price fluctuations from the sidelines. In Asia, the rate has jumped to 1.1608 on the back of a strong Aussie dollar following positive GDP data.
At the time of writing, the euro is trading at 1.1594 against USD. At the current price level the situation is ambiguous given that the daily candlestick has a long tail. This is a harbinger of bullish sentiment.
The pair has rebounded from the trend line. In theory this is a good place to sell, but Tuesday’s candlestick suggests that the pair is set to rise at least as far as 1.1628. Given the situation, I can envision two different trade scenarios:
I think the first scenario is more likely; i.e. buying on the rebound. There may be some difficulty in finding an entry point given that the euro crosses are trading up (which will push the euro up). Another factor is that the pair has rebounded from the trend line and with the trend on the hourly timeframe in a downwards channel, sellers could punish buyers by pegging them back to 1.1580. So, the lower we go, the more lucrative a trade will be.