So far this week, the EURUSD has played out according to the plan I laid out in Sunday’s video.
Given last week’s retest of descending channel support that extends from August 2018, a bounce was likely this week.
The long lower wick of last week’s candle supported that idea.
If you watched Sunday’s video, you also know that the EURUSD had closed above that 1.0825 key level on Friday.
Monday’s open was relatively weak, but buyers were able to recover with a daily close back above 1.0825.
That close kept the pressure on the next key resistance at 1.0900.
Notice how the EURUSD never did close below that 1.0900 area in 2019.
Fast forward to today, and you can see that the euro is off its session high of 1.0908 by more than 50 pips.
So is this the end of the bounce from descending channel support?
It’s difficult to say, but there are a few factors at play here.
Fundamentals aside, the trend is not your friend if you’re buying the euro.
Both the short-term and long-term trends point lower, which means any long positions are against the grain.
At the same time, there isn’t much room for the EURUSD to run to the downside if you’re a seller here.
The 1.0825 area isn’t far away, and that descending channel support has already proved its significance.
Between buying or selling, I have to choose the former.
But unless you were able to get long closer to 1.0800 on that retest of channel support or Monday’s retest of 1.0825, it may be best to wait this out.
It’s going to take a daily close above 1.0900 to expose higher levels.
One such level is the 1.0990 handle that I discussed at length at the end of last year.
Notice how 1.0990 served as support for EURUSD between mid-November of last year and late January of 2020.
That’s going to be a critical test for buyers if the pair can get there.
Alternatively, a daily close back below 1.0825 would once again open the door to the August 2018 channel bottom.
But even if the euro manages to take out 1.0900 resistance, I still think EURGBP could be the better option to play any relative strength from the euro.