Following the advance in the EUR/USD into its short-term resistance zone, the upside momentum remains exhausted and a short-term corrective phase is anticipated. This morning’s services and composite PMI reports across the Eurozone may provide a fundamental catalyst as price action is on the verge of a breakdown. The US ISM Non-Manufacturing Index is eagerly awaited, especially following the disappointing manufacturing report released on Monday.
The Force Index, a next-generation technical indicator, retreated from its peak and completed a breakdown below its horizontal support level; this turned it into resistance as marked by the green rectangle. The Force Index is now cleared to descend into negative conditions and place bears in charge of price action. This technical indicator is therefore expected to lead the EUR/USD to the downside until the Force Index will reach its ascending support level. You can learn more about the Force Index here.
Price action is currently located between its descending 61.8 Fibonacci Retracement Fan Resistance Level and its 50.0 Fibonacci Retracement Fan Support Level, inside its short-term resistance zone. The Fibonacci Retracement Fan sequence is anticipated to guide the EUR/USD to the downside, following a breakdown below its resistance zone which is located between 1.10734 and 1.10967 as marked by the red rectangle. Forex traders are advised to monitor the intra-day low of 1.10658, the low of a previously failed breakdown attempt; a move below this level is likely to initiate a profit-taking sell-off.
Uncertainty regarding the US-China trade deal has increased after US President Trump noted that there is no time pressure for a deal and his preference would be a delay until after next year’s election. This has raised concerns about the pending December 15th 2019 tariffs which remain on the table; Germany is especially vulnerable to the ongoing trade war. The short-term technical picture suggests a corrective phase in the EUR/USD into its support zone located between 1.09789 and 1.10035 as marked by the grey rectangle. You can learn more about a support zone here.
EUR/USD Technical Trading Set-Up - Breakdown Scenario
- Short Entry @ 1.10750
- Take Profit @ 1.10000
- Stop Loss @ 1.11000
- Downside Potential: 75 pips
- Upside Risk: 25 pips
- Risk/Reward Ratio: 3.00
A reversal in the Force Index above its horizontal resistance level may allow a breakout attempt in the EUR/USD to materialize. The long-term outlook for this currency pair remains bullish due to the US Federal Reserve’s balance sheet expansion and stealth market interference in its domestic interbank lending market. A breakout can take price action into its next long-term resistance zone between 1.11527 and 1.11753.
EUR/USD Technical Trading Set-Up - Breakout Scenario
- Long Entry @ 1.11200
- Take Profit @ 1.11750
- Stop Loss @ 1.11000
- Upside Potential: 55 pips
- Downside Risk: 20 pips
- Risk/Reward Ratio: 2.75
