On Tuesday the euro was extending decline for the third day in a row. No significant news came from the US while in eurozone is was mostly weak. In particular, the Consumer Sentiment Index in Europe was down in September. Will the dollar continue strengthening against the euro? We assume the market participants decided that the US economy would grow faster than the European one, due to the fact the Fed will start tightening its monetary policy while the ECB would rather go on with the loose policy by the euro emission and zero rates.
On Wednesday the Industrial Production Indices will be released in Germany and the US. Both are forecasted to be down so it is hard to predict the forex reaction. Note that the ECB President Mario Draghi speaks on Wednesday and the Fed President Janet Yellen on Thursday. Investors expect Yellen to speak on the further support of the EU economy through emission.
On the daily chart, EUR/USD is sliding down remaining in the uptrend. It has dipped below the 200-day moving average. The Parabolic and MACD indicators give the sell signals. The Bollinger Bands® have contracted a lot which means low volatility. The RSI fell below 50 still being far from the oversold zone. The bearish momentum may develop if the euro crosses the lower Bollinger Band and the fractal at 1.08. This level may serve the point of entry. The preliminary risk limit may be placed above the fractal high at 1.146.
Having opened the delayed order we shall move the stop to the next fractal high (short position) following the Parabolic and Bollinger signals every four hours. By doing this we adjust the potential profit/loss ratio in our favour. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level of 1.146 without reaching the order of 1.08, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
- Position Sell
- Sell stop below 1.08
- Stop loss above 1.146