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EURUSD Bulls Face Critical Test Next Week

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EURUSD has faced immense selling pressure since May of last year. After nearly a year’s worth of losses and 3,300 pips down the tube, it’s little wonder why sellers jump at the chance to sell even the slightest rally.

With a comment like that you may be expecting me to argue the opposite and vouch for the possibility of a sustained rally from current levels. But I don’t think that’s very probable given the intense bearish momentum we’ve seen for the better part of a year now.

Possible? Yes. Probable? No.

A relief rally like we’re already witnessing is a much more likely scenario. But the bulls aren’t out of the woods just yet as they face a critical test next week. In fact they face an even greater second test if the first level fails to hold.

The first test is currently underway. The market is testing upper level resistance that formed off of the March 31st and April 13th lows. This has us watching patiently for bearish price action on a 4 hour basis.

If this level breaks next week we can turn our attention to the 1.1035 handle. This level is much stronger than the first having rejected buyers on three separate occasions over the last four weeks.

This horizontal level also intersects with former trend line support which should now prove as strong resistance. The combination of these two levels make for an ideal place to watch for bearish price action.

Summary: Watch for bearish price action at channel resistance at 1.0820. If this level gives way, watch for bearish price action on a retest of 1.1035 as confirmation that the range is likely to hold. Key support comes in at 1.0470.

Key levels on the EURUSD 4 hour chart

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2 comments
Nial Fuller says

Its a descending channel signalling buy if the resistance is broken right?

Reply
    Justin Bennett says

    Hi Nial,

    Thanks for your comment. Given the bearish momentum I prefer looking for selling opportunities at key resistance for now.

    Have a great weekend.

    Cheers,

    Justin

    Reply
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