EURUSD Shorts Need to Be Careful

A few days ago the EURUSD carved a new seventeen-month low. It came following the November 7th bearish rejection from the 1.1430 key level.

Monday’s 1.1217 close meant that 1.1300 should begin acting as resistance. It’s what I wrote about shortly after Monday’s session closed.

However, yesterday’s close back above the 1.1300 handle signals indecision.

If you shorted the pair from 1.1300, you probably should have stayed on the sideline. That bounce from 1.1215 was far too aggressive for my liking.

In fact, here’s what I wrote in the member’s area before the pair even reached 1.1300:

Sure enough, EURUSD closed back above 1.1300 within 24 hours of that comment.

I’m not ready to call this week’s price action a bottoming move just yet though. There are too many headwinds for the euro aside from the Brexit headlines.

For one, EURUSD has been stuck in a downtrend since April. That means the momentum is against you as a buyer.

Second, that 1.1300 level could be as high as 1.1310. The support and resistance levels I mark on my charts are often areas rather than exact prices.

If it is 1.1310 instead of 1.1300, it means sellers stood their ground yesterday given Wednesday’s 1.1307 close.

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As you can see, we have conflicting information. When faced with indecision like this, I tend to do nothing while the market sorts it out.

I do think the weekly close will be significant here. If you look at the weekly chart right now, the euro is trying to carve a bullish pin bar.

But again, we don’t have enough information to call it one way or the other. At least not yet.

Here’s what I will say about the last 48 hours:

I would not be surprised to see EURUSD march higher over the coming sessions. The way the pair bounced back from sub 1.1300 levels was impressive.

If this week does carve a bullish pin bar, it will re-expose the 1.1430 resistance level. Alternatively, a daily close back below 1.1300 would keep the bearish pressure intact.

Given everything I just mentioned, I would not want to be short here. That plunge below 1.1300 and subsequent bounce from 1.1215 could signal a turning point that favors buyers.

Last but not least, keep in mind that these Brexit headlines aren’t going away anytime soon. While the volatility has mostly targeted the pound so far, the euro is not immune. Look no further than the volatile 100-pip swings this week.

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