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EURUSD – Have We Found a Short-Term Bottom?

EURUSD may be on the decline again having consolidated since Friday’s sell-off on the back of the surprisingly strong US jobs report.

A flag formation followed Friday’s selling and it appears the trend line support has now been broken which could now see 1.07 come under pressure again.

EURUSD 4hr [1]

This pair has experienced a lot of selling over the last few weeks since the FOMC dropped a strong hint that it could raise interest rates at its December meeting. With the markets having largely priced this in now, the bulk of the short-term selling may now have already happened and further declines may not quite have the vigour that previous ones have.

With that in mind, it should be noted that we appear to be seeing a divergence on the 4-hour chart between price action and the stochastic. While that in itself doesn’t mean we’re going to see a reversal to the upside, it does suggest momentum is being lost and the trend may be exhausting. A larger correction may therefore be approaching in the pair.

EURUSD Daily [2]

If we do see a break of Friday’s lows – around 1.07 – 1.0650 could offer support for the pair having briefly done so back in April. Beyond this, 1.0520 – 13 April lows – could offer further support.

As you can see below, OANDA clients are split on whether 1.07 is going to be a new low for the pair or further declines could come. Clearly though, 1.07 is a key level of interest and open orders are roughly split between buyers and sellers, with sellers appearing to slightly edge it.

Position Ratio [3]Open Orders [4]To get access to the order book [5] and position ratio [6] tools, among many others, visit OANDA Forex Labs [7].


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam [11]

Senior Market Analyst, UK & EMEA at OANDA [12]
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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