As I write this, the EURUSD is breaking below the confluence of support at 1.1875. We’ve had this area on our radar for several weeks. It seems sellers are beginning to win their first battle of the year.
The ascending channel that extends from the mid-April lows has played a critical role in recent months. It attracted sellers in late August with the help of the 2012 low at 1.2040.
The lower boundary of the channel attracted a bid just last week following Wednesday’s Fed rate decision and statement.
One thing I pointed out a few weeks ago is that buyers have yet to give up a handle since late April. Every time the pair has closed a session above a key level, they haven’t given it back.
It is true that the single currency has dipped below support levels since April. We’ve even seen a few lower wicks pierce the 1.1875 area starting with the August 31st bullish rejection candle.
However, buyers have always lifted the price back above support before the New York close at 5 pm EST. This has been the case since the single currency claimed the 1.0860 handle on April 24th.
So if EURUSD bulls give up 1.1875 this week, it would be the first time that’s happened in six months. A daily close (5 pm EST) below 1.1875 would also expose the August lows near 1.1670. A break there would pave the way for a move toward the mid-July pivot at 1.1490.
As always, what happens on the intraday charts doesn’t mean much. Today’s close at 5 pm EST will tell the real story; it will be a crucial one for both buyers and sellers.
I remain short from just above the 1.2040 resistance level. It’s a position I’ve had on since the September 8th bearish pin bar. I’ll consider adding to the short position if and when sellers secure a daily close below 1.1875.
Alternatively, bullish price action from 1.1875 would signal another move higher. That said, it’s going to take a daily close above 1.2040 for bulls to keep this rally alive.
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