EUR/USD outlook, week October 22nd: Likes range-trading, wants to go higher, but is overbought

     The latest EU summit has finished as expected with no major initiatives being announced. The perma-EUR-bear analysts will be howling as usual but traders will ignore them and get back to trading. The attached 4-hour chart shows how the market currently views the EUR; it wants to buy it but is unable to find enough momentum to break the range-trading mentality. It’s currently somewhat overbought so we can expect the usual Monday morning stop-loss hunt to find weak trailing stops below 1.3000. Any strong intraday rallies back towards 1.3100 are likely to run into heavy selling although with the EUR-crosses still looking quite well bid, deep dips will also be well supported. Throw any strong views out the window and stay in range-trading mode.

  1. Hi Szabi, a lot of the big hedge funds, particularly those that specialise in other areas and ‘dabble’ in FX, follow MA crossovers religiously. Certainly worth keeping an eye on.

  2. Thanks, Sean! Now, you are suggesting that the range trading is going to continue. What do you see as the potential prices on each side (up and down)?
    You wrote in your weekly forecast “Spanish yields are near 6-month lows and pairs like EUR/GBP continue to exhibit bullish strength, so being patient and buying big dips in EUR/USD seems still like the obvious play.” I agree, the Spanish yields are the best precursor for the eur/usd, even if the European bourses continue their slide. But again the question is: where would you feel comfortable to buy eur-usd? Thanks!

  3. Its hard to put a number on it Szabi, I’d prefer to wait and see how mkt develops but I think it unlikely that we trade outside of 126/135ish range for next 6 months, despite the US election, so anythng back at 12750/12800ish must be considered a good entry point? I think cross pairs like EUR/GBP and EUR/AUD could trade quite a bit higher with lack of bad news styming the bears. My m/t plan: when EUR/USD rallies, sell aud/usd and cable; when EUR/USD falls, buy it++

  4. hmmm, interesting plan, kind of a “triangle trading plan” 🙂
    I expect 2900-2950 -3200 range this week, and then I believe eur will go up a bit each week until the end of the year, at which point I think it’s going to be closer to 1.4 than 1.3

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