Today’s Trading Edge: EUR/USD – Euro rebounds after sharp fall to new low

WWM EURUSD DEC 24 14

EUR/USD has rebounded slightly back around the 1.2200 handle after having plunged to a new two-year low.  Prior to this new low, euro-dollar was tentatively respecting the 1.2250 level last week.  This level may now become key resistance for the current slide.

The 60-minute EUR/USD chart displays the key reversal that occurred with a bearish ABCD pattern at 1.2219.  Downward momentum accelerated after US initial jobless claims came in better than expected with 280k claims.  The prior reading was 289k, expectations were for 290k and the 4week average decreased to 290.25k.  Positive US economic data points may continue to help to give the U.S. dollar strength.

The euro could potentially begin to target a new long-term low around the 1.2050 level.  If bearishness continues, it could extend lower to 1.1750.  To the upside, in the event of any breakout above 1.2250, the 50-day SMA at 1.2478 should serve as a critical resistance level.

The trade: Sell EURUSD at 1.2200 with a stop loss at 1.2250 and a take profit at 1.2050.  The Risk/Reward Ratio is almost 1:3

Happy Holidays!

Edward J. Moya

Technical Strategist

Edward J. Moya is the Chief Market Strategist for edmoya.com, an educational website for foreign exchange and commodity traders. He has over 15 years of investment industry experience in forex, stocks, options and futures. At edmoya.com, Mr. Moya writes daily currency and commodity analysis and has authored numerous articles on trading using both technical and fundamental analysis for major financial publications. He is a contributor of technical and fundamental analysis in currencies and commodities to SFO, Market News International, and Forex Factory.

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