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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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Despite the indecisive price action of late, the EURUSD has respected key support and resistance nicely. On Sunday, I mentioned how 1.1530 would likely attract a bid while any retest of the 1.1640/50 area would trigger an influx in selling pressure.
Tuesday’s session reached a low of exactly 1.1530 before bouncing 50 pips into the session close at 5 pm EST. We then got a retest of 1.1640/50 on Thursday which attracted selling pressure. So far, today’s session has experienced more of the same.
Apart from the selloff that reached 1.1300 support last month, the Euro has been confined to a 300 pip range since early June. It’s been a lot of back and forth price action without any clear direction.
That said, if last week’s false break above descending channel resistance is any indication, we could see the EURUSD lose ground next week.
There are no guarantees, but a false break to one side of a pattern often results in an extended move in the opposite direction. In the case of the EURUSD, that would mean a move lower, perhaps back to key support at 1.1300.
However, sellers first need to clear the 1.1530 handle on a daily closing basis (New York 5 pm EST). It’s an area that has supported the pair since late May and was also responsible for Tuesday’s bounce.
If the pair does close below 1.1530 next week, there isn’t much to stop another run at 1.1300 support. Such a breakdown would give us more than 200 pips to work with, so this one will undoubtedly be on my list for next week.
Now, if buyers do close the EURUSD back above channel resistance as we saw in late August, I will most likely stand aside. I may even remove this channel from my chart altogether.
In summary, I’ll be interested in adding to my short position which I’ve been holding since last week but not until the pair clears 1.1530 support on a daily closing basis.
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