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The EURUSD has been in rally mode since testing key support at 1.1730. We discussed this area in the December 17 weekly forecast.
A second sign that bulls were in control came a week later. The bullish pin bar that formed at 1.1855/60 hinted at a move higher. After nearly 48 hours of consolidation, the single currency exploded higher toward the 2017 highs.
That brings us to this week’s price action. Over the weekend I had a level drawn at 1.2040. However, the last 48 hours have given me a reason to believe the ‘true’ level is closer to 1.2070.
As you can see from the chart below, 1.2070 is the August 29, 2017 high. The area triggered the first of two bearish pin bars that resulted in a 540 pip decline for the pair.
Based on Thursday’s retest of 1.2070 resistance, it seems Euro bulls want to take prices higher. But even if we do get a daily close above 1.2070, there’s another area that could prove difficult for buyers.
The ascending channel that extends from the November 2017 low could come into play next week. At the moment, channel resistance comes in somewhere near 1.2140/50.
Additionally, if you scroll back on the weekly chart to May and June of 2010, you’ll notice several weekly lows at 1.2140/50. We’ll see whether or not those lows combined with channel resistance become a factor over the coming sessions.
This doesn’t mean the pair will drop next week. What it signals, at least from where I’m sitting, is that Euro bulls could begin to struggle at 1.2070 or just above it.
Another consideration is that the pair is currently 250 pips above the weekly mean as measured by the 10 and 20 EMAs. That’s a considerable distance and one that doesn’t usually last long.
Keep all that in mind if you’re long the EURUSD. Gains are still possible up here, but if buyers intend to sustain a break above the 2017 high, a pullback or at least some consolidation may be needed first.
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morning coach
for the first time my chart analysis is beginning to look like yours….am looking at that resistance at 1.2140 too to short.
Good evening. 😉
That’s great to hear. There is a bit of confluence up there.
DDo
alFrom my own view, do not fight the trend. The main trend of ẺUR is an uptrend. Ofcourse, EUR is testing its resistance near 1.2070 level and may take some corrections. From TA view, EUR may form Inverted H&S daily chart. Hence, the next target will be 1.23 or more. I do not think EUR just stops here. Just my viêw
Justin thank you so much for your thorough analysis. They are very helpful especially to novice traders like me. I have a small question to you and Jeannie (who has commented below). There are nearly 300 pips between where the price is now to 1.2140. Instead of waiting for price to reach at this level to short why don’t look to go long on retracement in order to exploit some pips before price reaches 1.2140? Again thanks
Price is just 100 pips from the 1.2150 area. The trade idea I gave to members involves both long and short opportunities.
Good Afternoon Justin
Which swing low did u use when u applied a Fibonacci Retrecement tool? Is it 1.17117 or 1.18139?
The low of the period was July 2012, and it was 1.2042. Given that resistances and supports are rectangles rather than lines, does it not mean that at present it is a resistance?
Good morning Sir, am interested in this. Please Sir but don’t know how to start.
Haitham 0796550851