EURUSD bulls are hanging by a thread.
I’ve been discussing the falling wedge since December 24th. Resistance extends from April 2018 and support began in November of 2017.
On January 7th, euro bulls took out resistance which at the time was near 1.1430.
The breakout was followed by consolidation on the 8th and then a 100-pip rally on the 9th.
Everything looked promising for buyers.
But the two-day pullback late last week turned out to be a sign of structural weakness in the bullish narrative.
And things only got worse during yesterday’s volatility that preceded the Brexit vote.
However, the selloff wasn’t a total surprise for readers of this site.
On Monday I wrote how a move below 1.1450 wouldn’t necessarily negate the bullish potential.
In fact, those were my exact words.
The “real” line in the sand here is former wedge resistance (blue line). That level is now serving as new support.
As long as EURUSD remains above it on a daily closing basis, euro bulls have a fighting chance.
Click here to get instant access to the same “New York close” charts I use.
It isn’t going to be easy though. So far today I do not see much demand in the 1.1400 area to suggest that further gains are likely.
But as we know, that can change in a hurry.
It’s also important to understand the risks here. The breakout on the 7th and subsequent rally could be nothing more than a false break.
That’s always a possibility regardless of how good the technicals may appear.
We’ll have more information to work with by today’s 5 pm EST close.
A close above 1.1395 or so would keep the bullish potential intact whereas a close below it would likely negate the bullish outlook.
With this much uncertainty, it makes sense to watch and wait for now.
A bullish pin bar or similar from the 1.1400 area could indicate a buying opportunity.
Alternatively, a daily close below 1.1395 would negate the idea altogether.
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