The EURUSD bulls have once again failed to take out the 1.0635 area. I mentioned this level a couple of times last week and again over the weekend. Even last Monday’s retest of this area resulted in an 85 pip profit for me in less than 48 hours.
Yesterday’s session managed a high of 1.0630 before giving up 45 pips before the close. The long upper wicks from the last two sessions don’t inspire much confidence if you’re bullish the Euro.
With that said, sellers have yet to finish the job they started last week with a retest of the 1.0520 handle. This was something we discussed as being a key factor in opening up the next downside target at 1.0370.
So what exactly triggered yesterday’s drop, technically speaking?
Well, we knew the 1.0635 region was going to give buyers fits. But there was something else at work that kept them restrained.
A look at the 4-hour chart shows the resistance level responsible, at least on an intraday basis. There’s little doubt that the upper boundary of this wedge pattern played a role in yesterday’s rejection.
The big unknown at the moment is whether the pair will react to support in a similar fashion. That’s key because if it doesn’t, I won’t be interested in shorting a breakout from this structure.
Trading with price action is all about observing how a market responds to given levels and then exploiting those clues when the time is right. So if the EURUSD bounces from wedge support and later closes below it, I may entertain an entry.
Otherwise, I’ll remain on the sideline and continue to watch for clues on the daily time frame. Namely a close below the 1.0520 area. I’m not interested in buying the Euro given the bearish momentum that’s been in place since mid-2016.
Want to see how we are trading this setup? Click here to get lifetime access.