Post-French Election EUR/USD Game Plan

EUR/USD Daily

Technical Outlook: The Sunday post-election gap briefly saw EURUSD above resistance at 1.0984 before pulling back in Asia trade. Interim support rests at the November high-day close at 1.0909 backed by the 2016 open at 1.0872 (near-term bullish invalidation). Note that this level is also converges on the median-line of the modified ascending pitchfork formation we’ve been tracking off the yearly low. A breach higher eyes subsequent topside targets at the December 2015 high at 1.1060 and the upper parallel / 78.6% retracement at 1.1095. 

EUR/USD 240min

Notes: A closer look at price action highlights an embedded pitchfork formation extending off the April lows with the recent pullback now testing neat-term support at 1.0919/30. Note that the pair has been marking bearish divergence on multiple time-frames while the immediate risk remains for a move lower, the broader focus remains constructive while above the median-line / 1.0872 to open the week. A third of the daily average true range (ATR) yields profit targets of 24-28 pips per scalp. Added caution is warranted heading into Eurozone GDP & US CPI data later in the week with the data likely to fuel increased volatility in the respective crosses.

• A summary of IG Client Sentiment shows traders are net-short EURUSD- the ratio stands at -1.47 (40.5% of traders are long)- bullish reading
• Retail traders have been net-short since April 18- the pair is up 3.1% since then
• Long positions are 54.5% higher than yesterday and 22.0% higher from last week
• Short positions are 9.0% higher than yesterday but 11.3% lower from last week
• While broader sentiment continues to point lower, the recent build in long-exposure suggests the immediate long-bias remains at risk into the start of the week. That said, from a trading standpoint, I’ll favor fading weakness into structural support.