The EURUSD is currently testing critical support at 1.1530. It’s a level I’ve mentioned a few times recently, including last Thursday when I deemed the single currency to be bearish below 1.1700.
So far today, the euro has plunged to a low of 1.1505. However, for those who have followed me for a while now, you know how important the daily close can be in situations like this. It’s why I use New York close charts.
Anything other than the New York close at 5 pm EST can get you in trouble. The market opens at 5 pm EST every week, so it makes sense to have each 24-hour session close at the same time. This gives you five 24-hour sessions to work with each week.
How does this play into what we’re seeing on the EURUSD?
You’ve likely noticed how the pair has been flirting with 1.1530 so far today. The market dropped to 1.1505 earlier in the day and even spiked to 1.1557 moments ago.
But all of that is irrelevant if you’re an end-of-day trader like me. Essentially, the only thing that matters is where EURUSD closes the day at 5 pm EST. Everything else is just noise in my experience. It’s also a quick way to lose money if you aren’t careful.
So while EURUSD is (so far) down for a fifth straight session, as long as the pair remains above 1.1530 on a daily closing basis, further downside will be limited.
Now, if sellers can secure a daily close below 1.1530, it would expose the next key support at 1.1300. There isn’t much between 1.1300 and 1.1530 to prevent a selloff like the one we saw in August; though perhaps not as aggressive.
Keep in mind too that the euro is getting a bit overextended here. The daily mean as measured by the 10 and 20 EMAs is up near 1.1640, so we may see some additional consolidation or even a bounce while above 1.1530.
The bottom line is that 1.1530 will continue to attract buyers until the pair closes the day (New York 5 pm EST) below it. And if 1.1530 support does fail on a daily closing basis, there isn’t much to prevent another slide to the 1.1300 handle.
Alternatively, I’d expect the 1.1620/30 area to attract sellers if tested. Above that buyers would need to contend with the 1.1680 resistance area.