Stop me if you’ve heard this one before, but the euro looks to have established a bearish reversal pattern on its monthly chart indicating its major (long-term) trend has turned down. Some of you may recall I said much the same thing at the end of September after posting a bearish key reversal. This time around the euro posted a new high of 1.2349, its highest mark since April 2018, before closing at 1.2137, down from the December settlement of 1.22148. Technically, this established a bearish spike reversal, another pattern indicating the major trend has turned down. The difference at the end of January from last September is monthly stochastic also posted a bearish crossover above the overbought level of 80%, also a technical signal the major trend is set to turn down.
Similar to what I talked about in my Monthly Analysis of the US dollar index, one way to play this reversal is to sell near the January close and putting a buy stop just above the January high. Fundamentally there isn’t a lot of reason for the euro to go down or the USDX to go up, but it is what the charts are showing us as we turn the calendar page to February.