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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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On Monday I explained how a break of the five-week range on the EURAUD between 1.5720 and 1.5870 could have broad implications. Since late last year, the Euro cross has carved what could be a 1,000 pip head and shoulders pattern.
I actually mentioned the pending formation several weeks ago, but the 150-pip range between 1.5720 and 1.5870 prevented the completion of the right shoulder.
That may be about to change. As it stands now, the EURAUD is trading 50 pips below the 1.5720 range support. However, as always, it’s going to take a daily close below the level to confirm the breakout.
If sellers get the job done, it will put the pair in a new range to start next week. Key support would come in at 1.5620, and the former range support at 1.5720 would become new resistance.
It would then take a daily close (New York 5 pm EST) below 1.5620 to open the door to the next key support at 1.5460.
Of course, if the pair breaks the five-week range this week, it would also put sellers one step closer to carving the right shoulder of the (pending) head and shoulders pattern. See Monday’s commentary for more on that.
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