- EUR/USD back-and-forth trading has broad outlook mired with uncertainty
- Topping formation or bull-flag? That remains the big question on this end
- FOMC rate hike expected, but that doesn’t mean there won’t be volatility
See our Top Trading Opportunities for 2018 and expectations for market volatility this year on the DailyFX Trading Guides.
The euro continues to flip-flop from one week to the next; it’s strong, it’s weak, it’s strong, and so on. What does this mean? Immediately, it means very little as EUR/USD could still be in a topping process around the 2008 trend-line or building a bull-flag setting it up for an eventual continuation of the rally starting last year.
Either way, we need to wait for confirmation before committing ourselves too strongly. The topping scenario points to a lower-high having been carved out the week before last, and from here we should see the euro weaken towards the April trend-line and 2017 high just under 12100. From that point is where it could get interesting. A top would obviously imply that those levels won’t hold and a broad decline will commence.
However, a hold of the aforementioned support levels keeps the bull-flag scenario in play. If this is the case, it could take out until next month, possibly longer, before making good on a bullish breakout from the pattern and beyond the 2008 trend-line.
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EUR/USD Daily Chart
Chart notes: The red circles indicate double-top, lower-high scebario. The dotted green lines are a tentative outline for a bull-flag. How the euro reacts should it reach support should be very telling.
This coming week looks likely to continue working price towards one of the outlined scenarios, which means traders may have to continue demonstrating patience. The euro does, however, have immediate downside risk.
FOMC Ahead, Watch Sentiment
The FOMC is expected to raise rates on Wednesday, so there is likely to be no surprise to that end, however; the Fed could provide signaling which sparks volatility in the dollar, and ultimately moving the needle with the euro. For live coverage of the FOMC announcement, join Chief Currency Strategiest, John Kicklighter, on Wednesday at 17:45 GMT time.
Traders remain generally short EUR/USD, which used as a contrarian signal suggests we will see the euro appreciate. However, with price stuck in limbo there may not be much information to be gleamed from sentiment data at this time. With that said, watch how the data shifts on the IG Client Sentiment page should we start to see a move develop.
Resources for Forex Traders
Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.
—Written by Paul Robinson, Market Analyst
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