The euro may be in trouble as DXY bulls regain control above 97.70.
Watch today’s EURUSD and DXY video to see exactly how I’m trading it, including a few must-watch key levels.
EURUSD has been mostly sideways since August 12th. However, recent developments from the US dollar point to an opportunity this week.
As noted in Monday’s GBPUSD video, the DXY caught a bid at 97.70 last week. We anticipated this, as 97.70 is a confluence of support that I’ve discussed several times since July.
With that said, the euro is doing its best to hold the trend line support from August 5th. In fact, the pair is testing the level as I type this post.
The EURUSD also tagged a buy-side imbalance at 1.1691 overnight. I mentioned this level to VIP members on Monday as one to watch for a rejection. Sure enough, Tuesday’s EURUSD high is 1.1693.
The trigger for a move lower is two-fold. First, EURUSD needs to break below its August 5th trend line on a 4-hour closing basis. Second, the DXY needs to break above 98.20, which is the top of a descending channel from August 1st.
If that scenario materializes, the euro may target levels like 1.1590, and potentially the imbalance below 1.1520.
Alternatively, if the euro holds its August ascending trend line, buyers may target the 1.1736 imbalance first. However, the DXY would likely have to break 97.70 for that to materialize.
