Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!

 

 

Nonetheless, EURJPY remains a good selling opportunity to consider in the coming days and weeks as risk sentiment remains fragile and the Euro weak. Hence, EURJPY shouldn't go much higher for much longer in most probabilities, that is unless a big risk-on rally occurs (which could happen if, for example, the US and China reach a deal, but that looks highly unlikely).

 

Note that EURJPY is currently making an attempt at the major resistance trendline (119.00 area) that we discussed in our newsletter last week.

 

With that said, EURUSD is more sheltered from developments in risk sentiment and hence has a more stable downtrend, albeit one that has been moving very slowly. 

 

Nonetheless, with the pair in the wider 1.10 - key technical area, the opportunity to sell around here looks attractive. Although EURUSD is today breaking higher above the 1.10 level, the overall choppy price action makes it hard to determine clear technical developments such as breakouts or clear support/resistance zones.

 

Therefore, one thing to be careful about is fake moves above 1.10 (which could be what is happening today). Although a bullish breakout may look like things are turning in EURUSD, the probabilities that such a move would be fake are quite high.

The Forex calendar is very quiet for the next 2 - 3 weeks, before the ECB meeting on October 24 (Draghi's last meeting) and the next Non-Farm Payroll on November 1. So, without any major news on the political front, it's fairly likely that Fx pairs will stay in ranges.

 

However, do note that ranges indeed mean that large moves could be ahead. Once something moves the needle in one direction (for example, either bullish or bearish EURUSD), then a large move could quickly unfold.

 

There has been increased talk lately that the Trump administration grows increasingly unsatisfied with the strong Dollar. The possibility of the US Government undertaking concrete action to weaken the Dollar remains a risk against long USD positions. However, for now, they haven't taken any specific action (aside from labeling China a currency manipulator). So, there is not much else to work against the USD bull trend currently.
 

The ECB will need to increase the size of QE, and the Eurozone economy is highly unlikely to start recovering before the new year rolls over. The Fed, on the other hand, is not pressured that much to ease because the US economy is still in a much better shape.

 

With that said, instead of just ranging sideways, EURUSD could just drift lower over the coming weeks and drop toward 1.0800 slowly. We have talked about this multiple times here in our newsletter and our weekly analysis reports. To put it simply, if there is nothing else to do, EURUSD could just decline lower as that is the easiest route at the moment.

 

Hence, looking to take a short trade around current levels seems to be worth the risk here.
 

Now that the resistance trendline seems broken (day has not closed yet) watch out for the 38.2% Fibonacci retracement in the 1.1080 price zone. This 1.1080 - 1.1100 zone will be hard to break, and EURUSD might as well just reverse lower again here, despite the channel being broken today.

 

The 1.0877 low is now technically important in a bearish scenario, and once it's taken out, it will be the first more convincing signal that EURUSD could be dropping to 1.0800 and lower.

 

At the end of last week, and this week also, EURUSD retested the previous lows in the 1.1000 area. This is usually a continuation pattern in downtrends, but today's break higher challenges this scenario.
 

 

In such a case, looking to sell higher, in the 1.1080 - 1.1100 area, as described above, would be more appropriate.

 

If you have any questions or feedback, don't hesitate to reply to this email.

 

Thank you!