Interday technical analysis of EURUSD

Interday technical analysis of EURUSD

The four-hour timeframe of euro-dollar (EURUSD) shows us an overall upward trend. However, the movement seems to have lost strength since the end of last week. The most important area on this chart is likely to be the recent high slightly below 1.135. Technical indicators as well as price action suggest that this is a strong zone from which one might expect a downward retracement. Supports on this timeframe are less clear and so probably weaker. Areas of importance as support might include the current 1.126 and the key psychological area of 1.12.

Technical indicators on EURUSD H4

Moving averages indicate a buy signal overall. Although price is below the 20-period and 50-period SMAs, it remains above the 100 and 200 SMAs. One can see a number of golden crosses occurring last week. The 20, 50 and 100 SMAs crossed in quick succession last Tuesday. Then there was a golden cross of the 100 and 200 on Monday, which one might usually consider to be a strong signal.

The 20 and 50 SMAs provided little support. However, the presence of the 200 SMA close to the key area of 1.12 might strengthen this zone as the area of a bounce in the future. Furthermore, the 100 SMA might provide support around 1.123.

Conversely, last week’s poor NFP release confuses the technical picture somewhat. The aftermath of this news saw buying saturation as price moved completely outside the upper deviation of Bollinger Bands (20, 0, 2) for a period. The slow stochastic (15, 5, 5) also indicated overbought at that time. Weaker upward momentum followed this week’s lower opening, with MACD (12, 30, 9) declining. The histogram has remained below the signal line since.

Price action and Fibonacci

Recent price action on H4 euro-dollar suggests a degree of indecision with the potential for a larger retracement. One can see that the second attempt on 1.135 on Wednesday was followed by a fairly big downward movement. The second candle of these three down periods shows a particularly large wick, suggesting weakening buying pressure.

The current candle might form a classic downward engulfing pattern. If so, one might expect to see further downward movement. However, this conventional result should be questioned. Not only is the pattern still in the process of forming, but it also coincides with the 38.2% Fibonacci retracement area.

In addition to this, 38.2 Fibo is the same as the current position of the lower deviation of Bands. Combined with initial hesitance in the opposite direction around here last week, 1.126 appears to be a zone of fairly strong support from which price could resume its overall upward movement.

If price does move downward past 1.126, the next area one might study is 1.123. Here the 50% retracement area meets the 100 SMA. Below this, 61.8% could be important, but as yet this does not appear to be a particularly strong zone.

Today’s data points

  • 12.30 GMT: monthly retail sales (USA, May). Consensus 0.6%, previous -0.2%.
  • 14.00 GMT: preliminary Michigan consumer sentiment (June). Consensus 98, previous 100.

Retail sales in particular is a very difficult release to forecast with much accuracy. This means that traders should be prepared for instability this afternoon.

Interday technical analysis EURUSD: summary

Technical analysis of EURUSD H4 overall suggests a period of consolidation. A small ongoing downward movement is possible, but this afternoon’s data could upset this picture.

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