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The EURUSD is bouncing today after carving a bullish pin bar on Tuesday.
But the question is, how far can buyers take the single currency?
Is this just a relief rally or something more?
While nobody knows the answer to either question, we can use the recent price action to find clues.
First, the downtrend that has been in place since February of last year forces me to be more interested in selling than buying.
Second, until the EURUSD breaks free from the descending channel below, buyers will likely run into considerable selling pressure.
And third, the pair is still below the 1.1030/60 region.
I pointed out this area in Sunday’s forecast as one to watch this week.
You can see how 1.1030 is very near the August 1 low at 1.1026. And 1.1060 includes several lows from the second half of August.
As such, I do expect sellers to defend that 1.1030/60 area.
However, nothing in this game is certain.
No rule says the EURUSD can’t break through 1.1030/60 and even take out channel resistance near 1.1100.
That’s important to keep in mind regardless of the currency pair you’re trading as it will help you keep your position sizes under control.
I still like the idea of selling EURUSD on a retest of 1.1030/60, but I will want to see a rejection first.
A bearish pin bar or rejection candle will do.
That would expose the confluence of support at 1.0860.
On the other hand, if EURUSD begins to pressure the 1.1030/60 area without backing down, it would be a sign of an imminent (upward) breakout.
In which case, I will stand aside to see what happens at 1.1100.