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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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On Sunday I mentioned a short-term trend line on the EURUSD that could offer a buying opportunity this week. The level extends from the February 16 high and had capped the single currency on several occasions before Monday’s breakout.
Despite yesterday’s bull move, there was never much of an opportunity to get long. By the time the day closed, the single currency was just 30 pips below the 2008 trend line resistance.
I pointed out the 1.2450 area on Sunday as a possible target should the EURUSD break free from this short-term trend line. If you entered short at or near 1.2450, today’s decline has generated a quick 70 pips for you.
For me, today’s selloff from the 1.2450 area is significant for one reason – it tells me that the 2008 trend line is still a factor. It also means this multi-month terminal pattern still has a pulse, and that a break could trigger a multi-month run.
That’s the opportunity I’m most interested in at the moment. Sure, you could buy and sell within this tight range in the meantime, but recent price action has been relatively choppy which puts your trades at a higher risk of getting stopped out.
A lot of traders may view inaction such as this as missing opportunities. I get it. It’s easy to get caught up in these big daily moves and start chasing pips.
The way I see it, though, is that this is a spring that’s getting compressed from both sides. I would rather protect my funds so I’m ready when the spring pops than risk depleting some of my capital by chasing pips.
In the near-term, as long as the 2008 trend line near 1.2450/70 holds on a daily closing basis (using a New York close chart), the terminal pattern is still intact. Immediate support comes in at the short-term trend line near 1.2320/40.
If buyers are unable to keep prices above that 1.2320/40 area, we could see another run at the April 2017 trend line. Alternatively, a daily close above the 2008 resistance level would expose higher levels.
I’ll be sure to provide updates as we get closer to a break of this twelve-month terminal pattern. But until we get a close above trend line resistance or below the April 2017 trend line support, I will be on the sideline.
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