Over the weekend we discussed how EURUSD bulls took out the 1.1610 handle last week. This level is the May 2016 high and was expected to attract a bid if tested this week. Sure enough, today’s low so far is 1.1612.
Another level I mentioned on Sunday was 1.1710. It’s the August 2015 high as well as a significant range top. Yesterday’s session reached a high of 1.1712 before hitting a wall of sellers and eventually settling 66 pips lower at 1.1646.
These retests confirm the new range between 1.1610 and 1.1710. Similar to the 100 pip range on the CADJPY that I mentioned yesterday, we could have an upcoming breakout opportunity on our hands.
Now, one thing to keep in mind is that the EURUSD has been in rally mode throughout 2017. Conventional wisdom says to trade with momentum by waiting for a daily close (5 pm EST) above the range top at 1.1710 and then watch for a buying opportunity.
That may very well be the best approach. However, one event that could help shape things is today’s FOMC statement at 2 pm EST. Market participants aren’t expecting much from the day’s main event, but a high degree of complacency can be dangerous at times.
We’ll have to wait and see if the Fed has something up their sleeve which could draw a rather dramatic reaction via a pair like the EURUSD. The flip side is that today’s FOMC amounts to a whole lot of nothing in which case the pair will likely continue to consolidate.
Either way, I’m going to stand aside until we get a daily close below 1.1610 or above 1.1710.
Key levels to keep an eye on below the 1.1610 handle include 1.1490 followed by the 1.1300 area. Alternatively, a close above 1.1710 would expose the 2010 low at 1.1875.
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