The Euro recently experienced a sell-off that led to a retest of the 1.2 Fibonacci support level, which was seen as major resistance in July. EUR/USD has since within reason broken and is trending higher. This has created an interesting setup for the near term, as well as backstop levels for further movement either up or down depending on how strong it breaks through these levels. The 4H chart above shows the trade setups that would have been made if we were considering trading at this moment in time, with stop losses at 1.2310 and 1.2311 respectively and targets set just below both those levels at 1.2275 and 1.2265 respectively.
The first level that the EUR/USD will have to break through is the 1.2350 resistance, which is acting as a major pivot at the moment on the 4H chart above (1.2350), but on a smaller time frame (1H chart above), it acts as a major support level instead, also mentioned in our previous article with regards to this pair. The next level after that is the 1.2368 pivot, which is a Fibonacci Extension level from the 1.2069 low seen in July and then finally a stronger resistance at the 1.2380 level which was a key pivot seen back in August.
It has broken above the 1.2310 level and is currently testing the 1.2350 level, which will be an important test to see whether it can hold or if it will reverse back down in to support at these key pivot levels at 1.2310 and 1.2255 respectively. These pivot levels will be backstops for further movement either up or down. Below these levels we have the 1.2244 level, which is a Fibonacci Retracement from the 1.2083 high seen in July and below this there is the even stronger level at 1.2200, which was a key pivot seen back in August, where the EUR/USD had also found support and reversed higher.
If the Euro fails to break above 1.2350 and starts to fall back down then it may find support at these key levels firstly at 1.2254 which is a Fibonacci Retracement level from September’s highs and then later on around the 1.
Euro vs US Dollar
The EUR/USD is currently trading at 1.2320, which is a 24-hour gain of 0.11%. It had previously risen to 1.2359 earlier in the session, which was high for the day and so far appears to have been retraced back down to test the 1.2310 support level. This level was seen as a pivot at the end of July and since then we’ve seen this structure hold on many occasions therefore it holds as an important barrier for further upside potential, but also represents a backstop level in case of further deterioration in price action below this point.
We’ve seen the pair test the 1.2310 level before and this was seen as a major support level back in July, which resulted in a decline of almost -4% in what was one of the most memorable days for EUR/USD this year. We saw it retest these key levels several times over the course of July, but each time it failed to break through and we would see it start to rise up again only to find itself back at these same key levels.
What is the safest way to trade the EUR/USD long term?
Trading against a trend, such as the Euro vs. US dollar, will provide you with the greatest level of safety from a technical standpoint. The rise or fall (or consolidation) of this pair has a massive impact on the move of other pairs in its direction and so if you were to trade against it you can expect the price action of other pairs to follow suit as well.
What are the best time frames to trade the EUR/USD?
The Euro vs. US dollar can be traded in all time frames. If you’re trading a smaller timeframe, it is usually recommended to try and identify key levels with regards to support or resistance and then enter when price action has come too close to one of these levels. This prevents too many pips from being taken out by price action that you have not set a stop loss on, and also allows you to get out of the trade if your assumption was wrong and price action starts moving in the other direction.