In the last weekly forecast, I mentioned how I was cautiously bullish the EURUSD as long as price remained above the 1.1100 area. I also stated that a close above 1.1250/85 would expose the next key resistance level at 1.1390.
But perhaps a more important observation in that commentary was the confluence of resistance near 1.1430. To be clear, the area actually lies between 1.1430 and 1.1450.
The weekly chart below shows the significance of this area.
As of this writing, the pair is 20 pips off its session high of 1.1434. Note that this price is right between the two levels I just mentioned.
Now, considering the bullish momentum of late and fresh 2017 highs this week, I’m by no means bearish here, and I’m certainly not going to entertain a short right now. But the resistance area in the chart above is one to keep an eye on as this rally progresses.
An interesting observation here is that the two highs that formed this trend line (August 24, 2015, and May 3, 2016) were met immediately by sellers. In fact, both occasions triggered a selloff of more than 500 pips within a matter of weeks.
I’ll remain a spectator for now, but the EURUSD will be one to watch as bulls confront of the confluence of resistance at 1.1430/50. A daily close above it would set the stage for a continuation of the 2017 rally.
Alternatively, a bearish signal from this area could offer an attractive opportunity to get short. Although that idea may seem counter trend, the truth is that the single currency has been range-bound since early 2015. Look no further than the weekly chart above.
We’ll have to wait and see if this time is different for buyers or if they’re walking into another trap. Next Wednesday’s FOMC meeting minutes and Friday’s non-farm payroll will be key factors in determining the likely path forward.
Want to see how we are trading this setup? Click here to get lifetime access.