If you read Sunday’s forecast, you know I wasn’t keen on the idea of buying the EURUSD. I even wrote that I was in no hurry to buy the pair.
I also pointed out the lack of momentum since the beginning of June. For nearly two months, the single currency has been range bound following the 800 pip drop that commenced with the April 20th breakdown.
This consolidation looks more like a continuation pattern to me than anything else. That’s how I’ve been treating it ever since the pair sold off from the 1.1830 handle on June 14th.
As I write this, Friday’s bullish pin bar is failing. The pair has taken out its low at 1.1612 and isn’t far from reaching the range low at 1.1520/30.
That pin bar, by the way, is the one I denounced on Sunday. Here’s what I wrote:
Friday’s signal is no doubt a bullish one. The shape of the candlestick is ideal and it also formed at a key support area.
However, keep in mind that the EURUSD is still range bound. There hasn’t been any momentum one way or the other since the single currency broke below 1.1830 on May 16th.
You may also know how I feel about Friday signals. Essentially, the lack of volume before the weekend tends to produce patterns with relatively high rates of failure.
The bottom line is that we were waiting to see if Friday’s signal was a directional cue or simply a liquidation event before the weekend. It seems we now have our answer.
So where to from here?
At the moment, the EURUSD is trading below that 2017 trend line on an intraday basis. I mentioned this level a few weeks ago. If the pair closes the day below it (New York 5 pm EST), we will likely see offers develop near 1.1630.
Note that the pair has broken this level once before, though. The June 28th breakdown ended up being a false break in the end. Evidently, the range support at 1.1520/30 was too strong.
It’s going to take a daily close below 1.1520/30 to open up downside targets including 1.1440 and 1.1300. That said, I do think a daily close below the trend line near 1.1620/30 would trigger another round of selling pressure.
If buyers can manage to keep the pair above that 1.1620/30 area into today’s close, we could see a bid develop. Just keep in mind that the 1.1720 resistance level which I also mentioned on Sunday isn’t far away.