Could the EURUSD be trying to rally from current levels? Trying, yes, but succeeding to do so will be a challenging task.
The pair came under heavy selling pressure early last week after rallying nearly 1,000 pips from mid April to mid May. The selling didn’t slow as the bears managed a weekly close below key support at 1.1050, carving out a bearish engulfing pattern on the daily time frame.
This week has been much of the same. However as mentioned in the weekend commentary, the 1.0850 handle is expected to act as strong support. That was apparent during yesterday’s session in which the pair rallied 80 pips from a low of 1.0818 to close back above the key support level.
So where do we go from here?
First and foremost, my bias towards EURUSD is bearish at the moment. But timing an entry requires more than a directional bias. For that we turn to some key levels in focus.
The pair is too close to support at 1.0850 to consider a short and a long would be counter-trend, something I certainly don’t want to entertain given recent USD strength.
This leaves us in “wait and see” mode for now. That is until the pair can either break support or move back to new resistance at 1.1050 and produce a favorable selling opportunity.
Summary: Wait for a daily close below 1.0850 and then watch for a retest of the level as new resistance. Alternatively, a move back to 1.1050 would have us looking for bearish price action on the daily time frame.
