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EURUSD is down again today following remarks from ECB President Mario Draghi.
That isn’t a surprise though. Technically speaking, the euro has been trending lower for more than a year now.
The single currency is down 1,300 pips since the February 2018 high.
And despite a lot of indecision since October of last year, the EURUSD maintains its downward trajectory.
You may have seen my March 5th commentary in which I warned EURUSD shorts.
The issue I have with shorting the euro down here is twofold.
On the one hand, the support area between 1.1215 and 1.1250 is likely to attract a significant amount of buying pressure.
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That does not mean EURUSD will bounce from there or that the market can’t break 1.1215/50 support.
However, shorts above this area could easily backfire.
The second issue I have with EURUSD shorts is the massive thirteen-month falling wedge pattern.
I wrote about this formation on Tuesday.
It’s important to remember that the wedge above started developing more than a year ago.
With that in mind, there’s no reason to think the EURUSD is going to make good on this pattern next week or even this month.
For all I know it may take another three months.
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In fact, if you extend wedge support and resistance until the two intersect, you will see that it’s technically possible for the pair to wait until the end of May.
That’s a significant realization. Why?
Because it means the EURUSD could remain under pressure for several more weeks or months.
There is also no guarantee that this falling wedge will trigger a move higher.
Patterns like this usually do, but there are no guarantees.
I do think the EURUSD has the potential to surprise traders with a bullish move later this year, but as long as this wedge is intact, the pair will remain under pressure.
The pair is likely to encounter bids between 1.1215 and 1.1250.
However, a daily close below 1.1215 would expose wedge support near 1.1050.
Alternatively, a daily close above wedge resistance near 1.1340 would be a significant development for bulls. It would also expose the 1.1480 area.
Justin Bennett is an internationally recognized Forex trader with 10+ years of experience. He's been interviewed by Stocks & Commodities Magazine as a featured trader for the month and is mentioned weekly by Forex Factory next to publications from CNN and Bloomberg. Justin created Daily Price Action in 2014 and has since grown the monthly readership to over 100,000 Forex traders and has personally mentored more than 3,000 students.Read more...
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