The euro resumed its bearish trend against the U.S. dollar this morning after solid U.S. data on inflation and business orders bolstered expectations that the Federal Reserve will hike interest rates in June or September. The news was not all positive in the U.S. as Jobless Claims had its biggest increase since December 2013 with claims climbing 31,000 to 313,000 in the week ended February 21st.
Price action on the 60-minute EURUSD chart shows that price has finally broken out of its tight consolidation zone and has resumed its bearish trend. Since making a key low at 1.1096 on January 26th, the short squeeze that took place early this month was only able to take price up to 1.1533. If price is unable to recapture the 1.1250 region, we could see the noted January low tested and evenutally breached.
Eventual downside targets include the 1.0826 level, which could ultimately form a bullish ABCD pattern. If that level does not provide a slight bounce higher, we could see a run towards 1.0550. To the upside, 1.1450 remains critical resistance.
The Trade: Sell EURUSD 1.1210, with a stop loss at 1.1310, and a take profit at 1.1010. The risk/reward ratio is 1:2
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading