EUR/USD temporarily rallied overnight after the Eurogroup reached a tentative deal for Greece that in the end produced a worst deal than what was offered in February and earlier last week. The need for getting the banking system opened forced Greek Prime Minister Alexis Tsipras to concede to the creditors’ demands.
The initial rally took euro higher to 1.1196, before falling significantly lower to the 1.1050 support level. Price action on EUR/USD 60 minute chart shows that for a third consecutive week, euro gapped lower, but this time quickly filled the gap before sharply heading lower. Price is tentatively forming a bullish Gartley pattern at current levels and if we do see a rebound, the 1.11 handle should provide initial resistance. Point D of the pattern is tentatively targeted by the 70.7% Fiboncci retracement of the X to A leg and the 141.4% Fibonacci expansion level of the B to C rally.
If the bullish technical pattern is invalidated, we could see price immediately target the 1.0990 – 1.10 zone. If downward pressure persists, the next level of support will come from last week’s low of 1.0915.
With the focus shifting towards the Fed and a potential rate hike in September, 1.08 level remains my next major low target, with price eventually targeting fresh 2015 lows below the 1.0461 level.
The trade: Sell EUR/USD at 1.1070, with a stop loss at 1.1170 and take profit at 1.10870. The risk/reward ratio is 1:2
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading