It looks as though the “inevitable relief rally” on the EURUSD that I wrote about on Monday has begun. In truth, today is the follow-through from yesterday’s surge and retest of 1.1930 as new resistance.
Here’s what I wrote on May 7:
It’s also important to plan for the inevitable relief rally. Sellers are undoubtedly in control at the moment, and I don’t see that changing. But Euro bears just unwound four months of upward to sideways movement in twelve trading days.
It begs the questions: when will sellers reach a saturation point, even a temporary one? Will it be 1.1930, 1.1830 or a much lower level?
Wednesday’s low, which would also become the weekly low, was 1.1822. That’s just seven pips below the 1.1830 handle I mentioned on Monday, so no surprise there.
The big question now is, can Euro bulls hold onto today’s gains and close the single currency above 1.1930?
If so, we could see the EURUSD extend today’s gains into next week. Such a close would also produce a bullish long-tailed candle on the weekly time frame, but it all comes down to today’s close at 5 pm EST.
A daily and weekly close back above 1.1930 would expose 1.2090 next week. We have to go back to January 4 to find the last time this level served as resistance.
If sellers cause buyers to retreat back below 1.1930 into today’s close, the EURUSD will start next week in a vulnerable position. In that case, the 1.1930 handle would continue to serve as resistance with support coming in at 1.1830.