EUR/USD ended the week on its knees, hardly holding above 1.10, after Draghi’s 5 blows to the common currency.
What’s next? The team at SocGen examine price action:
Here is their view, courtesy of eFXnews:
Corrective pullback in EUR/USD after testing multi decadal channel appears to be at an important juncture, argues SocGen.
“Considering a largely negative close this week, EUR/USD will form an evening star, a candlestick pattern that signals possibility of down move. It is noteworthy that this evening star coupled with a shooting star back in August gives bearish connotations,” SocGen notes.
“Current pullback within flag resembles to the one in 1998-1999 when a shooting star ended the recovery. Weekly MACD indicator is still in negative territory and is close to a multiyear resistance trend which suggests the upside is capped,” SocGen adds.
As such, SocGen thinks that the current break below 1.1085 means a retest of multi decadal channel support at 1.05/1.04 with intermittent targets at 1.0940 and May lows of 1.08.
“This massive channel remains the decisive level for next leg of downtrend as a move below 1.05/1.04 will confirm that the ongoing correction is not just a retracement of the up move since 2000 but in fact of the whole up cycle since the 1980s,” SocGen adds.
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