The long standing problem in the EUR/USD price is range containment. Since May, EUR/USD ranged 501 pips from 1.0916 to 1.1417. Range containment is derived from the EUR/USD daily price curve as its price struggles for many months in severe overbought on the long end and massive oversold on the short end.
Price containment also evolved based on EUR/USD’s relationship to DXY as ranges over the past 3 months were contained to 200 pips. EUR/USD not only fights against it own price curve but it struggles against DXY. Not only is the DXY price low, oversold and bottoms close but the EUR/USD price is also low. Negative 90% Correlations says one side must win.
What is seen in current EUR/USD price is not only massive overbought but a range explosion is here. Range explosion confirms as well the EUR/USD breakout in monthly DXY V EUR/USD. Range explosion means 1.0900 to 1.1400 cannot hold much longer as price pressures continue to mount to serious levels.
The upside story is not long EUR/USD for 1 pip and hit the shorts instead. Yet the bottom is contained at today’s 1.1205 and 1.1154 but those prices are built upon a base at 1.1115. Worse is today’s EUR/USD bottom is located at 1.1211 and for now protects the 1.1205 break point.
How EUR/USD travels lower is a break of 1.1255 then the shot to 1.1211 and 1.1205 break followed by 1.1191, vital break at 1.1154 then 1.1143 and on to 1.1115. Further down comes the daily points at 1.1094 and 1.1080 and both points are also monthly levels in the DXY V EUR/USD August relationship.
On the upside, the multi month and downslope trend line is located at 1.1400’s and protected by today’s forward lines at 1.1470 and 1.1464.
Two options exist to trade EUR/USD. The first is stay miles away from this pair or hit the short side but don’t marry any trade in any direction until the break occurs.
Brian Twomey, Inside the Currency Market, btwomey.com