During yesterday’s session, the EURUSD broke free from the consolidation that began following the November 24th retest of 1.0515. But it took the pair carving out a new eighteen-month low for buyers to get behind the single currency.
It was just Sunday when I mentioned how a trade in either direction was a bit of a gamble due to the recent choppy price action. The volatility we’ve seen over the last 24 hours is a perfect example of what I meant.
Another factor going into yesterday’s session was the Italian referendum. It was no secret that the outcome would affect the Euro in some way, and it certainly didn’t disappoint.
With the pair now firmly (back) above the January low at 1.0710, there isn’t much to prevent a retest of the 1.0820 handle. We also can’t rule out the possibility of a move toward recent lows at 1.0855 which would close the gap from November 14th.
Not only did the pair close back above 1.0710, but it also managed to engulf the previous thirteen sessions in the process. So while I’m still bearish the EURUSD over the long-term, yesterday’s 290 pip rally suggests that more gains are likely in the near-term.
A move beyond the 1.0855 area would expose the July lows at 1.0950. If buyers manage a close above that we could see a retest of the trend line that extends from the 2016 high.
Alternatively, a close back below 1.0710 would turn our attention back toward the 1.0515 handle.
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