Was the crossover that caused divergence between the Euro and Dollar a sign of change in direction?
By Edward M. Hamman
BrunHam Investments Technical Analyst
EUR USD
For the past 2 years, after 2017, the
EUR/USD was in a downtrend, where the bears were strong, and the bulls were
trying to find their ever-failing entries. That was until the first quarter of
2020, where the bulls fought back and made a strong new high, breaking the
trendline to the upside and holding support.
A frequent question was asked by many
of our fellow trader followers: “When will the trend change from bearish to
bullish for the EUR/USD?”
So, through a lot of analysis, we
found 2 trend lines which showed a great significance in the direction of the
market. Were a lot of traders were running to safety from the news of COVID-19,
the dollar became stronger, making the EUR/USD more bearish. But just before
the news of the Corona Virus, the 2 trend lines formed divergence, which immediately
caught our attention.
Fig. 1.2
On February 27, 2020, there was a
divergence (as shown in Fig. 1.2) when the Euro crossed over the Dollar to the
upside. This may be an indication of a change in trend, giving the Euro more
bullish movements. After the divergence the EUR/USD made a new higher high,
which was a confirmation to the divergence.
But not long after, the market shot
down from there after the COVID-19 news as the dollar became stronger. This may
be because there were a lot of buy orders to fill, or because people see the
dollar as the safe haven.
The support levels are around at 1.08970, 1.08660,
and 1.08030.
Today we breached the 1.08970 and 1.08660
levels, and now it is holding support at the above mentioned 1.08030 level. If it breaches this level, it
will find support again around 1.07310 level.
Looking at Fig. 1.1 above, we must
keep an eye that the market, that it should not make a new lower
low, for Fig. 1.2 to work. If it indeed makes a new lower low, then we might
see trouble coming.
Because Europe was announced as the
hot-spot for the COVID-19 virus, the market has a chance to drop for the
EUR/USD. So, have you stop losses in place to manage your risks.
We will continue to show these
figures -and more- as we go on and you will have a chance to see them
grow and form as the market changes. Please like our page and follow us on
Twitter to have awareness on another point of view in the forex market.
(THE FOLLOWING INFORMATION IS PURELY SPECULATIVE AND WE DO NOT ACCEPT ANY LIABILITY FOR GAINS NOR LOSSES ACHIEVED BY USING THE GIVEN INFORMATION)
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