EUR At Risk Of A Bullish Reversal At The 200-week MA

1.13 remains an important level for the Euro as we head towards the weekly close, with a growing potential it could mark a bear-trap and reversal of fortunes for bulls.

Starting with the daily chart, it looks straight forward for bears. The trend is clearly bearish, it trades within a descending channel and bearish hammers have provided timely swing highs. Mean reversion has kicked in at the lows yet prices remain below the 20-day average, whilst yesterday’s spinning top Doji shows a hesitancy to push higher. That’s all well and good but, only the weekly chart is on track for a bullish reversal pattern whilst a close above 113 warns of a bear-trap. Only recently AUD was in an identical situation, before its bullish hammer at multi-year lows went on to provide a springboard for a 4.3% rally.

We can see on the weekly chart the dominant trend remains bearish, but prices have recovered back above the 200-week average and original breakout level (1.13). It’s not often we get to speak of such a long average, but it’s worth noting that since the second half of 2017 prices have produced bullish rallies above the 200-week MA. If we are to see a close above 1.13 there’s a serious risk of further upside, which will be music to the ears of counter-trend traders, who’ll be looking to break the bearish channel on the daily.

 

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