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The EURUSD looks set to move below 1.1070 support.
But where might the pair encounter buyers on the way down?
Watch the video below to find out what I think.
Be sure to also scroll down for more commentary and an annotated chart.
The EURUSD is pulling back this week after retesting the October high.
You can see where the pair carved a bearish engulfing pattern on Monday, which hinted at Tuesday’s pullback.
Notice too how the euro is currently testing that key support area at 1.1070 that I mentioned on Saturday.
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But given the intensity of this selloff, I’m not expecting 1.1070 to hold this time.
It appears the EURUSD needs to blow off more steam before the next rotation higher can materialize.
This isn’t surprising, though.
Just look at how choppy the EURUSD has been since it entered this descending channel at the end of last year.
Consecutive weeks of gains and even losses have been difficult to come by.
However, if the single currency intends to rally further against the greenback, it needs to happen above 1.0990, in my opinion.
I often talk about the importance of highs and lows.
Notice how the recent swing high in mid-October was higher than the last swing high in mid-September.
That was the first higher high from the EURUSD since June.
Now, if we draw an ascending channel top connecting those swing highs from September and October, we get a pattern like the one below.
We can use a price structure like this to determine where the pair might encounter buyers and sellers going forward.
The channel below also suggests that the EURUSD may see more downside.
A daily close below 1.1070 would expose that critical support area between 1.0990 and 1.1020.
Notice too how the ascending channel support is just below that region.
That’s why I think that if this pullback from the EURUSD is just a temporary correction, the next leg higher will likely materialize around 1.1000.
If that support area doesn’t hold, all bets are off for a higher euro.
Be sure to watch the video for all the details.