EURUSD Sellers Face Key Test at 2018 Low

by Justin Bennett  · 

March 7, 2019

by Justin Bennett  · 

March 7, 2019

by Justin Bennett  · 

March 7, 2019

EURUSD is down again today following remarks from ECB President Mario Draghi.

That isn’t a surprise though. Technically speaking, the euro has been trending lower for more than a year now.

The single currency is down 1,300 pips since the February 2018 high.

And despite a lot of indecision since October of last year, the EURUSD maintains its downward trajectory.

You may have seen my March 5th commentary in which I warned EURUSD shorts.

The issue I have with shorting the euro down here is twofold.

On the one hand, the support area between 1.1215 and 1.1250 is likely to attract a significant amount of buying pressure.

That does not mean EURUSD will bounce from there or that the market can’t break 1.1215/50 support.

However, shorts above this area could easily backfire.

The second issue I have with EURUSD shorts is the massive thirteen-month falling wedge pattern.

EURUSD falling wedge pattern on daily time frame

I wrote about this formation on Tuesday.

It’s important to remember that the wedge above started developing more than a year ago.

With that in mind, there’s no reason to think the EURUSD is going to make good on this pattern next week or even this month.

For all I know it may take another three months.

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In fact, if you extend wedge support and resistance until the two intersect, you will see that it’s technically possible for the pair to wait until the end of May.

That’s a significant realization. Why?

Because it means the EURUSD could remain under pressure for several more weeks or months.

There is also no guarantee that this falling wedge will trigger a move higher.

Patterns like this usually do, but there are no guarantees.

I do think the EURUSD has the potential to surprise traders with a bullish move later this year, but as long as this wedge is intact, the pair will remain under pressure.

The pair is likely to encounter bids between 1.1215 and 1.1250.

However, a daily close below 1.1215 would expose wedge support near 1.1050.

Alternatively, a daily close above wedge resistance near 1.1340 would be a significant development for bulls. It would also expose the 1.1480 area.

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EURUSD key support and resistance levels

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  1. Thanks for the analysis Justin. But I am just wondering, why devote so much time to this pair (mainly from swing trader point of view)?

    1. I don’t think I’ve devoted that much attention to it. Just this week I’ve discussed GBPUSD, GBPAUD, USDJPY, NZDJPY, CADJPY, gold, and the S&P 500 in addition to the EURUSD.

      But regardless of what the euro is doing, EURUSD has always been a pair readers of this site want to hear about. I don’t write these posts for myself. 😉

  2. The daily candle is about to close below the levels you have stated, nice analysis I have been short this pair since Monday.

    1. You’re right; nobody knows. It isn’t my job as a trader to “know” where a market is going. That’s a fool’s errand.

      But basic technical analysis tells us that old support becomes new resistance. Pretty straightforward, really.

  3. Weak & weakening EUR fundamentals have been supporting this down trend for a long time. Yes technicals are important, but a good trader cannot afford to ignore fundamentals. They give you confidence also to stay in a trade longer, if you understand the fundamentals of both currencies.

    1. We can agree to disagree on that. I’ve done well for myself by ignoring fundamentals for years.

      Everyone needs to devise an approach that works for them. There is no one-size-fits-all in this industry.

  4. Thank you very much Justin Bennett for the analysis, I really appreciate the good work you are doing daily, keep it up Sir.. It really helps a lot.

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