EUR/USD – Where to Sell?

EUR/USD – Where to Sell?

EUR/USD – Where to Sell?

After two days of sharp losses EUR/USD rebounded on the back of stronger German and weaker U.S. data. U.S. new home sales dropped by the largest amount since July 2013 and German business confidence increased. However the improvement in sentiment along with Friday’s stronger Eurozone PMI report failed to lend support to the currency. This is partly because German businesses were less optimistic about current conditions. Yet EUR/USD shorts need not worry because the ECB sealed the currency pair’s fate when they signaled plans to ease. We view any rally in the currency pair as a dead cat bounce that should be sold but with a possible disappointment from the Fed this week, there could be the opportunity to sell the pair above 1.11.

We believe the ideal place to sell EUR/USD is between 1.1145 and 1.1245. If the Fed is less hawkish, EUR/USD could squeeze towards the 100-day SMA at 1.1170. There’s significant resistance between the 50-day SMA at 1.1255 and the 100-day SMA, so if a first entry triggers below 1.1170, the second place to sell would be near the 100-day SMA which coincides with trendline resistance. EUR/USD could also stall near 1.1215, the 61.8% Fibonacci retracement of the 2000-2008 rally. On the downside, we target the July lows of right above 1.08.

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