Two days ago we looked at how EURUSD had reached the key support zone at 1.1530. The idea, at least for me, was to wait and see if sellers could force a daily close (New York 5 pm EST) below the area.
Given the September 27th breakdown and resulting weekly bearish engulfing candle, I wasn’t interested in buying the euro.
It didn’t take long for euro bears to breach 1.1530 support. Yesterdays 1.1476 got the job done which means the area should begin to attract sellers on a retest as new resistance.
As you can see from the chart below, the pair is now retesting the underside of 1.1530. That’s no surprise considering how the single currency was 140 pips below the daily mean (10 and 20 EMAs) at yesterday’s close.
You may know that markets love to retrace 50% of recent moves. There’s something about that number that attracts price like a magnet. We often see this phenomenon with candlestick patterns like the pin bar and engulfing bar.
It’s no coincidence that 1.1530 is 50% of Wednesday’s range. And it just so happens that, although not at a swing high, yesterday’s range did engulf the prior session, so a retest of the 1.1530 (resistance) area was likely.
As long as sellers can keep EURUSD contained below 1.1530 on a daily closing basis, I’ll remain cautiously bearish. I’m also interested in catching the next leg lower, but not until I see a proper signal to get short.
Alternatively, a daily close back above 1.1530 would negate the bearish outlook. It would also put 1.1530 in a supportive role once more with key resistance coming in at 1.1620.
For now though, sellers remain in control. Keep in mind, however, that we have non-farm payrolls coming up on Friday at 8:30 am EST. The event doesn’t pack the punch it used to, but it isn’t a release to be trifled with nonetheless.