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The EURUSD broke a significant level on Wednesday.
I wrote about the 1.1180 level on Tuesday noting that a daily close below it would expose the 1.1050 region.
Wednesday’s 1.1152 close put the single currency well below the 1.1180 handle on a daily closing basis.
That means any retest of 1.1180 will likely encounter an influx of selling pressure.
This idea is in line with the current trend as well.
Since last April, the EURUSD hasn’t given buyers much hope. And as choppy as this year has been so far, the pair has been carving some decent swings.
In fact, the last four downturns have produced moves between 250 and 300 pips.
What’s more, those selloffs have taken two weeks or less to play out.
We’ll see if sellers have a fifth downturn up their sleeve; so far so good.
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But here’s the key…
I won’t consider shorting EURUSD without a retest of 1.1180 as new resistance first.
There are a few reasons for that.
First, the 1.1180 area served as a significant support level for several months so the market may need to backfill this area before moving lower.
Second, I need a favorable risk to reward ratio. The EURUSD is too close to the November 2017 trend line near 1.1050 for me to consider a short.
And last but not least, today’s price is nearly 100 pips below the 10 and 20 daily EMAs.
That means a retracement of some sort is likely.
It will probably take until next week for the pair to mean revert to the 1.1180 (new) resistance area.
I will continue to favor shorts while EURUSD trades below 1.1180 on a daily closing basis.
Key support for next week comes in near 1.1050.
Alternatively, a daily close back above the 1.1180 area would negate the bearish outlook and expose 1.1250.