The Dollar is giving back some ground against the Euro and the British Pound after several weeks of gains. The trend reversal comes as global Central Banks adopt a more dovish tilt, while Brexit uncertainty clouds the U.K., and as President Trump steps into the currency debate.
The Euro is seeing strength and making a run past 1.12 against the Dollar to start the new trading month. The uptick comes after seesaw action during the month of May and as focus turns to the next European Central Bank meeting on Thursday. A big move is expected, and traders will be watching for a break of the recent downtrend for signs that a reversal is underway.
Euro bulls have had little to cheer about lately. After losing 4.5% to the Dollar in 2018, the currency is again facing losses in the early parts of 2019. In fact, the 2% drop in the first quarter was its worst in four years. EUR/USD is now facing an important test heading into the next European Central Bank meeting this Wednesday, April 10.
Will this be the impetus leading EUR/USD on it's next leg lower?
Breakouts above major resistance or breakdowns below major support are a trader's dream. They occur rarely, but offer opportunities for trades over multiple days. Such was the case when Euro futures ($6E) broke down in mid-August.
For multiple months, the Euro put in a strong level of support around 1.16, bouncing between there and lower highs beginning in May. As the chart shows, this put in a technical formation of a descending triangle, which is a bearish technical pattern. That bearish pattern played out here in the Euro when prices ultimately broke below support.
Coach Dan breaks down this trade and exactly how traders can identify these moves and profit.
EUR/USD was in a strong uptrend throughout all of 2017, rising more than 14%. The Euro, in general, was the best performing major currency of 2017. What made the move so impressive was that it was somewhat unexpected. As discussed, the U.S. Dollar came into the year on a strong note. However, fears of political instability subsided, Eurozone growth surged, and the European Central Bank (ECB) was forced to begin withdrawing its stimulus.
Those three factors turned the market around.
As the chart below shows, the first major breakout in EUR/USD came mid-April on the weekend of the French presidential elections (April 23) when it became clear that Emmanuel Macron would defeat Marine Le Pen. The market feared Le Pen would ride in on a global wave of populism and might pull an upset – potentially leading the French to exit the EU. That did not happen, and the EUR/USD surged.