French Election Sends Euro Soaring

EUR/USD Technical Analysis – 24 April 2017

EUR/USD spot: 1.0876

Support: 1.0825 1.0765, 1.0720

Resistance: 1.0908, 1.1115, 1.1300

Strategy:

• Buy a break of 1.0908 if confirmed by a retest of the breakout:
• Profit target: 1.1115, Stop loss: 1.0908
• Sell a break of 1.0825 if confirmed by a retest of the breakout:
• Profit target: 1.0720, Stop loss: 1.0825

Last Week’s Action

The Euro has spiked to a five-month high in response to the results from the first round of the French presidential election. This means both of our profits targets were met on our longer term long Euro position. While the Euro traded higher for most of the week, it’s worth noting that the dollar index was also in a down trend – so we have been seeing Dollar weakness as much as Euro strength.

Euro Strength or Dollar Weakness

The Euro is now positioned for a Macron win and would be extremely vulnerable if anything were to upset this narrative.

Donald Trump has set himself some lofty goals for the week. He wants to attempt a new version of the healthcare bill, get tax reform moving and include funding for a wall on the Southern border. And he wants to put all of this on the agenda with the extended debt ceiling looming. The opportunities for his opponents to frustrate him are numerous.

Notable data for the week includes consumer confidence tomorrow in the US, and ECB press conference and US employment data on Thursday, followed by Eurozone inflation data and US GDP data on Friday. But, sentiment for the week is likely to be dominated by rhetoric surrounding the US legislative agenda and the French elections.

Decision Time on the Weekly Chart

The Euro is now testing a critical resistance level around 1.0908 against the USD. Last week’s price action also confirmed a weekly Euro bull trend by confirming a higher low at 1.0570. For this resistance level to break will possibly require support from the fundamentals. This may come in the form of encouraging economic data in Europe, or negative fundamentals in the US.

EUR/USD Weekly chart

Short Term Consolidation Likely

The Euro gapped up to test 1.0908, before falling back to form temporary support at 1.0825. It’s likely that the pair will consolidate between these two levels until news flow supports a move in either direction. A break in either direction will be tradeable if confirmed by a retest of the breakout level.

A break to the downside is likely to find support at 1.0720, while a break to the upside may lead to an extended rally to anywhere from 1.1115 to 1.1300.

EUR/USD 4-Hour Chart