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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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Yesterday I discussed how it wouldn’t surprise me to see the EURUSD gain some ground this week. The pair’s 800 pip drop since breaking below wedge support on April 20 has been impressive and perhaps a bit much for sellers to keep up with.
Last Wednesday’s 130 pip surge was the first sign of shorts beginning to unwind their positions. That session also closed above a trend line that extends from the 2017 low.
Today’s bounce is another indication that the 2017 trend line support near 1.1650 is having its way. However, the 1.1720 resistance level is also doing its part.
I pointed this level out on Sunday as one that buyers must overcome in order to push this relief rally higher. So far, even the recent 4-hour bearish pin bar is illustrating the sell orders that have gathered above 1.1720.
As you might guess, though, there isn’t enough room to the downside to entertain a short. I also wouldn’t want to rely solely on a 4-hour signal in this case.
Instead, I’m going to let each daily close (remember, I use New York close charts) speak for itself. If the EURUSD manages a daily close above 1.1720, we’ll likely see the single currency trend higher toward 1.1830.
Alternatively, a daily close at 5 pm EST below that 2017 trend line near 1.1650/60 would re-establish the downtrend and expose 1.1570.
If I had to guess, I would say that a move higher is likely in the interim. The bullish long-tailed candle on the weekly time frame combined with the overextended prices (200+ pips below the weekly mean) suggest additional gains are in order.
Does that mean I’m bullish the Euro?
Not exactly, no. In fact, the only reason I’d like to see some additional upside here is to sell at a higher price. I don’t believe the recent selloff is over and I’m not willing to risk my capital to find out.
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