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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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Last Wednesday I pointed out how the EURAUD had dropped back inside an ascending channel. Buyers broke free from resistance on September 7th, but were unable to hold support and closed back below the level on the 18th.
At the moment, the price action between the 7th and 18th still appears to have been a false break. That isn’t surprising though given that an upside break of an ascending level usually results in a false move just as we saw here.
I figured the 1.6140 area would hold as resistance following the September 19th close. I even wrote that a retest of the 1.6230 area seemed less likely given the way the pair was behaving earlier this month.
Fast forward to today, and you can see buyers had other plans. Yesterday’s session did retest the 1.6230 resistance area, and so far today has picked up right where yesterday left off.
Now, before I talk about additional levels, I do want to point out that this market is in a clear uptrend. EURAUD has been trending higher since early 2017. Even the recent surge above channel resistance carved a new three-year high.
That doesn’t mean EURAUD won’t pull back from the 1.6230/50 area, but it does suggest we could see the pair churn in this area for sometime before the market exhausts itself.
It may take another day or a week. Or the pair may decide to carve a higher high above 1.6350 before pulling back from its most recent 770 pip rally.
The point is, nobody knows what will happen here. That’s always the case regardless of how good your strategy is or market conditions.
As always, if you’re uncertain about a particular market or idea, it’s best to do nothing. And if you think EURAUD is likely to pull back from the 1.6230/50 area but you’re uncertain about the timing, it’s a good idea to wait for bearish price action.
Based on what I see as I write this, I’d stand aside for now. Let the market churn up here and show its hand before you consider a counter-trend trade. That way, if buyers do take prices higher, you won’t have to sit through the open drawdown.
Resistance comes in between 1.6230 and 1.6250. Key support comes in at the September 20 low at 1.6050 with a daily close (New York 5 pm EST) below that exposing the confluence of support at 1.5860.
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