The Euro-Dollar (EURUSD) has hit a resistance zone before the New Trading Season.
The Euro-Dollar hit lows for 2018 on August 15, but quickly rebounded back to what was more-or-less the prevailing price level for July 2018. As the Holiday Getaway Season concludes and a new Trading Season begins after Labor Day in the United States, the Euro-Dollar’s future movement in September 2018 from a technical perspective does appear to have bearish inclinations.
EURUSD Daily Chart
EURUSD 4 Hour Chart
The main takeaways:
- The 10 day Relative Strength Index is coming closer to overbought conditions.
- Volumes from July and August 2018 are lower on a daily basis compared to the rest of the year.
- Hanging Man Candle with the Open and Close in the Resistance Zone.
- The bearish divergence on the 4 Hour Relative Strength Index with the price.
- Price came out of the Resistance Zone on the 4 Hour Chart.
All of these factors add up to a likely bearish scenario to come.
The History of EURUSD Going from the End of August to September
To get an idea of what the transition is from the so-called “Dead Period” of the Northern Hemisphere Summer to the beginning of what is ostensibly a new trading season, a comparison was made as far as the EURUSD price movement from July 1 through August 31 and from September 1 through October 31.
The findings are that from 2006 going forward, the price is more likely to make a continuation in terms of direction in September through October from July through August. This trend has been bucked in the past three years (2015-17) and there was even greater directional movement from the Open on July 1, 2017 to the Close on August 31, 2017 compared to the Open on September 1, 2017 to the Close on October 31, 2017.
Considering the track record of the Euro-Dollar, based on recent trends and history going back to 2006, there is reason to believe that the directional movement that the slight upward movement (0.32% as of August 29, 2018) from July 1 through August 31 will be exceeded from September 1 through October 31. There is also support for the case to be made that bearish conditions will follow much like the past three years.
There’s a case to be made that the U.S. Dollar will strengthen against the Euro based on history and technical analysis alone.