Since the start of the new year, the EURUSD has been trending higher. But despite gaining nearly 500 pips over the past five weeks, this rally still looks corrective given the bearish momentum since last May.
Over the weekend, I commented on the ascending channel that has directed price action since the January 11th low. And based on last Friday’s bullish close, it seemed that buyers had yet to exhaust their resources.
However, yesterday’s close below channel support warns of a turn lower. The level is joined by the 1.0715 handle, which adds another layer of conviction to yesterday’s breakdown.
During Tuesday’s session, I mentioned how the U.S. Dollar Index (DXY) had broken to the upside of a five-week descending channel. This is another sign that some of the major currencies may be losing their appeal versus the greenback.
Moving forward, I suspect any retest of 1.0715 will be confronted with heavy selling pressure. To the downside, the first key support level comes into play at 1.0515, which was the 2016 closing price along with several lows in November and December.
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