Extreme highs or lows in any market tend to become a supporting or resisting force in the future. But that doesn’t always translate to a horizontal level. Sometimes these areas produce trend lines that can transcend weeks, months or even years.
I’m sure you recall the March 10th ECB-inspired move on the EURUSD. At nearly 400 pips, it was the largest single-session move since the previous ECB rally on December 3rd of last year. In fact, it remains the second largest single-session move of 2016 behind the June 24th Brexit.
The March 10th low at 1.0820 has teamed up with the post-Brexit low at 1.0910 to form what appears to be the lower boundary of a wedge pattern. The upper level is one I pointed out over the weekend which extends from the 2016 high at 1.1615.
This support level could very well be the last line of defense for buyers, at least concerning the tight trading range we’ve seen over the last few months.
One level that is likely to be problematic for buyers should they manage to push prices higher is the 1.1060 handle. This is the December 2015 high and also acted as a key pivot between February and March. Above that the recent lows at 1.1122 are sure to attract offers should price extend that high.
To the downside, we have the July low at 1.0950 followed by the March 10th ECB low at 1.0820. Based on the last few months of price action I’m hesitant to get overly bearish, but a move lower does appear to be the path of least resistance.
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