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EURUSD: Bearish Reversal Intact Despite USD Weakness

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EURUSD bulls are once again challenging the October 26 close below 1.1670. They did so between November 2 and 3, but sellers rejected the advance, leaving the single currency below the key handle on a daily closing basis.

Thursday’s plunge in the dollar index (DXY) has sellers working overtime to defend 1.1670. We’ve discussed this level at length over the past few weeks.

The recent bullish spark is challenging what appears to be a head and shoulders that developed between August and October. The close below 1.1670 on October 26 confirmed the pattern, but so far bears haven’t been able to do much with it.

However, I’m not ready to change my bearish EURUSD bias just yet. While it is true that follow through from sellers has been lacking, there isn’t enough evidence to say the USD rally is over.

I saw several headlines yesterday claiming that Thursday’s selloff killed the U.S. dollar’s rally. In my opinion, that isn’t true, at least not from a purely technical standpoint.

US dollar index daily time frame

The dollar index is entering a key area of support between 94.10/30. This is the neckline of the inverse head and shoulders that also confirmed on the 26th of October.

As long as this area holds as support, U.S. dollar bulls have a fighting chance. Likewise, as long as the EURUSD 1.1670 handle holds as resistance on a daily closing basis (5 pm EST), sellers remain in control.

If it fails to hold and the USD breaks below 94.10/30, all bets are off. Such a scenario would place the EURUSD back within the range between 1.1670 support and 1.1875 resistance.

All of the above comes down to where the pair closes at 5 pm EST. That is the only thing that matters as far as I’m concerned; everything else is just noise.

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EURUSD daily chart showing key resistance level

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11 comments
Darius says

Yea, this is the resistance. But while DXY might go till channel support, it might hit SL in eur USD – we are now very close to 1.167, but for DXY it looks there is room to fall.

I have SL 1.16967 – over november 3 high. But is this enough? Maybe better to increase at the cost of risking to loose more?

Reply
    Justin Bennett says

    That isn’t a question for me to answer.

    Reply
      Darius says

      May I know why it isn’t question for you to asnwer?

      Reply
        Justin Bennett says

        Because you’re asking whether or not you should increase your risk. That’s not my decision. It’s not my money.

        Reply
          Darius says

          We will not have right to ask you give our lost money back 🙂 final decition is ours.

          Reply
          Darius says

          But anyway thank you at least for the forecast. This info still makes me easier to learn.

          Reply
MIMI says

I took 2 sells from the 1.1670 level this week and thanks for great analysis Justin. Will keep my eye on this level again after market close later.

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Roy Peters says

It looks like the resistance level is holding. I’m glad I have a day job i couldn’t sit at my computer looking at all that intraday noise and price going back and forth like that, it would fry my nerves! If price goes past this level 1.1170 I’m out…… for now anyway.

Reply
    MIMI says

    Hi Roy, it’s a myth that full time traders sit in front of their charts the whole day as you perceive it to be. Trading is my full-time job, but that does not mean I sit in front of my charts the whole day at all. Just as you have to be at your job full-time the whole day, traders do the same, but we certainly don’t sit in front of our charts the whole day and why we have alerts we can use on our phones or laptops.
    Regards
    Mimi

    Reply
Stanley says

Waiting for it to hit 1.12000

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Richard says

What is the 5percent of $100

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