EURUSD bulls are off to a fast start so far this week.
Last Tuesday I mentioned the potential for another retest of wedge resistance near 1.1340/50. At the time, EURUSD was trading at 1.1280.
Today we’re seeing that retest come to fruition.
Now, because buyers haven’t wasted any time this week, I would put that resistance area closer to 1.1350/60.
Determining points of interest with diagonal levels is always a bit of a guessing game as it depends on how quickly the market retests the level.
But remember that it’s going to take a daily close above this area to confirm the breakout.
It isn’t enough for the EURUSD to pierce 1.1360 on an intraday basis. That’s especially true for a trend line of this significance.
A daily close at 5 pm EST above this trend line is what it’s going to take.
Go here to get access to the same New-York-close (5 pm EST) charts I use.
So what about selling the EURUSD from this area?
You could, but I’m not a fan of the idea.
If this is indeed a falling wedge, the euro is nearing the end of the pattern. That means a breakout may not be far away.
In other words, I’m more inclined to watch for buying opportunities above this trend line than shorts below it.
However, nothing says the pair has to break out this week.
As I’ve mentioned recently, the EURUSD could technically stay within this formation until the end of May.
But that rarely happens. Most wedges break before the market reaches the very end of the pattern.
Keep in mind too that we have a Fed rate decision and statement this Wednesday at 2 pm EST.
The EURUSD may decide to stay below resistance until that time.
Those events on Wednesday could also serve as a catalyst for a move higher or lower depending on how the market interprets the outcome.
A daily close above trend line resistance would expose the horizontal level near 1.1480 which extends as high as 1.1500.
Alternatively, bearish price action such as a pin bar from resistance between 1.1340 and 1.1360 could send EURUSD back to 1.1130.
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