Could the euro be about to collapse?


Jason Sen

A double top on the weekly EUR/CAD chart, in overbought conditions, with very negative candles at each peak, signals potential for a big correction to the downside.

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Intraday charts clearly show a potential head and shoulders (see below). You can see good support at 1.5835/25 from the 23.6% Fibonacci, head and shoulders neckline and 200-period moving average. A break below here should therefore act as a confirmation sell signal.

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Now this is interesting. The EUR/AUD daily chart shows a negative candle yesterday at the upper trendline of the 10-month channel. There’s a good chance of a top here in overbought conditions. Even a relatively small correction to the first 23.6% Fibonacci, 100-day moving average and lower trendline of the channel takes the pair down 600 pips to 1.5600/1.5580.

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Even more important is all the longer-term trendline resistance we just hit on the monthly chart! It’s too much of a barrier for bulls to overcome at this stage.

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EUR/USD has held at the important longer-term Fibonacci resistances of 1.2516 and 1.2600. In addition, here we meet both the 100 and 200-month moving averages and an almost horizontal eight-year trendline. The monthly chart therefore shows risks increasing to the downside for this pair too.

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The EUR/JPY daily chart shows the pair holding below the 200-day moving average at 132.00 now, after a significant sell-off through February.

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The weekly chart is more interesting. We topped just below a 10-year trendline! The only thing supporting the euro here is the 200-week moving average at 129.50/40.

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If we look at the monthly chart below for EUR/JPY we see the 200-month moving average is also offering some support (although we did run through it by over 100 pips in March).

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If both of these 200-period moving averages break, just look how far the pair could fall if it were to target the lower trendline of the 18-year triangle pattern. This is located in the 97.00/96.50 area, which would be a drop of another 3400 pips!

Jason Sen

Technical Analyst & Trader

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