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Is EURUSD ready for the next leg down after almost two weeks of reprieve? That’s exactly what we’re going to discuss in today’s commentary. We also have setups in EURJPY and NZDCAD to cover as well.
To no one’s surprise, the Euro has been weak across the board since May of 2014. A better word for the 11 month decline might be lethargic. Call it what you will, but this decline has resulted in a massive loss of more than 3,000 pips.
Many have claimed that the pair is “oversold” at current levels, yet it continues to slide lower. I don’t put
much any stock in the terms, oversold or overbought as it’s all relative. An oversold signal to one trader is a signal to sell for another.
My point here is this – focus on the trend, key levels and price action signals and you will have all the technical knowledge necessary to profit over and over again. Forget about indicators and especially forget about the idea of using oversold or overbought as an indication of market sentiment.
On to today’s setup on EURUSD. After falling more than 3,000 pips, the pair was able to find support during the middle of the month as it bounced from the 1.0470 level.
That bounce took us nearly 600 pips higher before the pair began to stall during Tuesday’s session. I have been keeping an eye on the 1.0904 level over the past couple days, noting several times on Twitter that a close below it could trigger the next leg down.
Yesterday’s price action not only closed below this level but also form a bearish engulfing pattern in the process. Whether or not we actually get a retrace back to new resistance at 1.0904 is anyone’s guess, but I like this market lower from here.
Summary: Opportunity to sell on a retest of new resistance at 1.0904 coming off of yesterday’s bearish engulfing bar. Key support levels come in at 1.0640 and 1.0470.