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EURUSD Setting the Stage for a Larger Rebound or Tiring Already?

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It’s no secret that the EURUSD has struggled for quite some time. Even the consolidation that began in March of 2015 and extended throughout last year appears to be a bearish continuation pattern.

So far in 2017, the single currency has gained against the US dollar. The rally began after sellers challenged the 1.0366 handle in December but couldn’t soak up the layer of bids that had formed.

But judging by the last 48 hours, this rally may only provide some respite from the broader multi-year downtrend.

There are two reasons behind this line of thinking.

The first is that despite closing the January 17th session above the 1.0650 handle, buyers failed to hold prices above the level at yesterday’s close. As mentioned over the weekend, the 1.0650 area is a key pivot based on the price action since late November of last year.

The second reason is what appears to be a rising wedge on the 4-hour chart. A narrowing formation such as this that develops against the trend usually represents a continuation pattern.

On the other hand, the pair could just be setting the stage for a larger rebound. So while recent price action suggests a near-term top, the volatile market conditions of late are a stark reminder that prudence is never an optional quality to possess.

From here I’ll be watching to see how the pair responds to the lower boundary of the structure below. A close below it followed by bearish price action on a retest would expose the next level of support at 1.0515. A daily close below 1.0515 would open the door for a move toward the multi-year lows at 1.0366.

Because yesterday failed to hold above 1.0650, this area is once again resistance for the EURUSD.

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EURUSD 4-hour chart

Leave a Comment:

6 comments
tim cobb says

I need help with patients and discipline. it seem I get in a trade and its going well then it turns, I get out and reverse then it turns back. WTF am I doing wrong ?

Reply
    Justin Bennett says

    Tim, there’s no way to answer that with the information given, but it’s all about staying patient and waiting for the very best setups.

    Reply
Morgan Rangasamy says

Looks like as of today (10am in Malaysia, GMT+8) , EURUSD in 4-hr chart, is holding above 1.0650. So, can we take is that EURUSD is supported at 1.0650, and is heading up the wedge pattern? Maybe the wedge will break downwards later, but for next few sessions……..?

Reply
    Justin Bennett says

    You could, but I’m not touching it.

    Reply
Anggara says

Hi Justin, has been 2 years I regularly read articles and trade your setup, I want to ask, if there is a signal price action in the time frame daily buy or sell, did you still checking the 4 hour chart to ensure that the signal is feasible traded or not ? thank you very much

Reply
    Justin Bennett says

    I trade both time frames, but I don’t usually check one and then the other. In other words, I trade each one independently on its own merits.

    Reply
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