One week ago we looked at how the EURUSD had become overextended to the upside. At the same time, the single currency was fast approaching the 1.1875 resistance level that I also mentioned in the July 31st commentary.
Buyers made their best effort to keep prices elevated last week, but Friday’s selling pressure proved too strong. At just under 100 pips, the single session loss was the most since May 8th.
While I like to stick to the daily time frame as much as possible, something is happening on the 4-hour chart that caught my attention.
The steep uptrend that’s been in place since July 13th has carved what appears to be a 4-hour ascending channel. If that is indeed the case, Friday’s close broke channel support and today’s price action is testing former support as new resistance.
Of course, whether you consider going short depends on the rules you’ve outlined for yourself. But I will say that the combination of Friday’s break and today’s retest make buying up here riskier than ever.
I’ll maintain the idea that the EURUSD has entered a corrective phase as long as the 1.1875 handle holds on a daily closing basis. And as long as 1.1800/20 holds on a 4-hour closing basis, the downside risk remains elevated.
Want to see how we are trading this setup? Click here to get lifetime access.