Much has been said about EURUSD and the rally that has consumed the first four months of 2016. But for those who trade the higher time frames, this is just consolidation, and the larger downtrend is still very much intact.
Sure, the pair has managed to climb over 700 pips so far this year, but at the end of the day, the swing highs from 2015 remain untarnished. Even the recent high on May 3rd fell short of retesting the prominent August 2015 high by a sizable 100 pips.
This doesn’t mean the pair has been untradable. There has been some decent price action within the fifteen-month range between 1.1600 and 1.0500.
But at the same time, it’s important to keep things in perspective. EURUSD is range-bound after coming off a 3,500-pip landslide in 2014 and is thus vulnerable.
I mentioned the 1.1357 handle in the recent weekly forecast, noting that it was formerly 1.1340. In doing so, I received several questions asking why I made the adjustment.
My reasoning is threefold:
- It lines up with the May 10th minor swing low
- It doesn’t cut off the candlestick body from April 19th (unlike 1.1340)
- The 1.1357 level lines up with the 23.6 Fibonacci level when measuring from the May 3rd high to last week’s low
The reasons outlined above lead me to believe that any retest of 1.1357 is likely to come under considerable selling pressure. Does that mean 1.1340 is insignificant and will, therefore, fail to act as resistance?
Not quite. In fact, I’m seeing sellers flock to 1.1340 as I type this. However, it does suggest that a close above 1.1340 wouldn’t negate the bearish bias in the near-term. In my opinion, only a daily close above 1.1357 would do that.
If selling pressure picks up where Friday left off, the first key support area to come under fire would be the April low of 1.1210 followed by 1.060.
Alternatively, a daily close back above 1.1357 would signal that buyers remain in control and could ultimately expose the current 2016 high near 1.1600.
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