Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Chart Of The Day: Euro Facing Considerable Downside Risk

By Investing.com (Pinchas Cohen/Investing.com)ForexMar 16, 2022 09:28AM ET
www.investing.com/analysis/chart-of-the-day-euro-facing-considerable-downside-risk-200620131
Chart Of The Day: Euro Facing Considerable Downside Risk
By Investing.com (Pinchas Cohen/Investing.com)   |  Mar 16, 2022 09:28AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
EUR/USD
-0.07%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NG
-0.09%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

There are plenty of geopolitical headwinds roiling global markets right now. Unfortunately for the EU, the eurozone appears to be at the vortex of many of them. And the euro, the region's single currency, appears to be bearing the brunt of much of the current risk.

As Russia's incursion into Ukraine grinds on, the refugee crisis it's created will burden an economy already struggling to maintain growth. Sven Jari Stehn, Chief European Economist at Goldman Sachs warns that if Russian President Vladimir Putin were to shut off the natural gas supply Russia is currently sending to European countries, rising gas prices would reduce GDP growth in the euro area by 0.6%. He cautions it could go as high as 0.9% in Germany, Europe's economic engine.

If Germany's economy were to flag, it would be difficult to ignore the likely additional repercussions to the EU economy as a whole.

Moreover, rising gas prices will further inflate already spiking inflation. Still, it's difficult to believe that Russia would take such a drastic step since it would hurt the country's already reeling economy even more. But Putin's ambition, and ego, should never be underestimated.

Whatever happens, the eurozone has already been pummeled by the blowback of war and the European Central Bank's hawkish shift. The double whammy has sent European stocks and the EUR/USD into a selloff. 

EUR/USD Daily
EUR/USD Daily

The euro may be developing a rising flag at the bottom of a falling chart. That means that the current rebound is likely to be short-lived.

This pattern occurs when short-sellers cover, thereby creating only temporary demand. When that demand evaporates, supply is expected to break the channel, pushing it into an even steeper decline.

Of course, that scenario will likely play out only upon a downside breakout of the flag. Otherwise, the common currency could rebound to the top of the falling channel, even if it will then turn lower.

However, the more frightening chart is the broader, monthly view.

EUR/USD Monthly 1996-2022
EUR/USD Monthly 1996-2022

This longer term chart shows more clearly how the puzzle pieces fit together on the macro level. The pair has completed a massive monthly H&S top, whose natural neckline is the 200-month MA. Since then, the EUR/USD has been forming another huge H&S continuation pattern, being tested currently.

So far, it's found support, but these drastic moves take time to play out. We can expect the pair to plunge toward the 2001 lows if and when the current pattern is complete.

Trading Strategies

Conservative traders should wait for the price to break the falling channel before risking a short.

Moderate traders would be content with a downside breakout of the flag before taking a position.

Aggressive traders could go short at will, provided it meets their preset trading plan and conforms to their personal risk tolerance. Here's a generic example:

Trade Sample

  • Entry: 1.1000
  • Stop-Loss: 1.1100
  • Risk: 100 pips
  • Target: 1.0700
  • Reward: 300 pips
  • Risk-Reward Ratio: 1:3
Chart Of The Day: Euro Facing Considerable Downside Risk
 

Related Articles

Kenny Fisher
Australian Dollar Remains Volatile By Kenny Fisher - Sep 29, 2022 2

AUD/USD has reversed directions today and is down 1.07%, trading at 0.6425. Aussie Roller-Coaster Continues The currency markets have been busy this week, and the Australian...

Al Brooks
EUR/USD: Second Leg Up Likely By Al Brooks - Sep 29, 2022 3

EUR/USD bulls got a strong reversal bar yesterday. This is a strong enough surprise bar that the odds favor at least a 2nd leg up. Today tested the midpoint of yesterday’s bar as...

Chart Of The Day: Euro Facing Considerable Downside Risk

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Abraham Falodun
Abraham Falodun Mar 16, 2022 7:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
his there till hope for a sell it broken the SL already
Gideon Strassmann
Gideon Strassmann Mar 16, 2022 6:20AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Great read
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email