The EURUSD continues to churn sideways following the test of 1.1875 resistance in early August. Unless something changes next week, it looks like the entire month will be spent ranging between 1.1670 support and 1.1875 resistance.
Last week I also mentioned how the 1.1820 handle has become a factor. This is the 50% retracement of the weekly bearish pin bar that formed in the first week of August. We can see how the area has continued to attract offers over the last few days.
You may have noticed the former channel resistance in my chart from the August 14th commentary. In fact, it was more prominent in the July 31st post where I first mentioned the 1.1875 resistance area.
That particular ascending channel gave way to an upside break on May 16th. It was then retested as new support on June 20th.
Taking into account the 800 pip rally that began following that June 20th retest in the chart above, it appears we now have a second ascending channel in play. The upper boundary of the structure was partly responsible for attracting offers at 1.1875 in early August.
Support, on the other hand, hasn’t become a factor, but that could change as early as next week.
Should the single currency retest 1.1670 again within the next couple of weeks, it will be at a confluence of support. A buy signal from 1.1670 could produce a favorable opportunity to get long for a move back to 1.1875 and perhaps the 2012 low at 1.2040.
Alternatively, a daily close (5 pm EST) below 1.1670 would suggest that the rally that began in mid-April is under severe pressure. It would also expose the next key support at 1.1490 and perhaps even former channel resistance that extends from the February highs (see chart above).
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