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EURUSD Surges Above Key Resistance

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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.

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Two days ago I discussed how the future direction for EURUSD hinges on 1.1720. The area is the intersection of a key horizontal level and a trend line that extends from the July 9th high.

That trend line, by the way, maybe the neckline of a 440 pip inverse head and shoulders pattern. If confirmed, it would signal the halfway point of the rally that began in mid-August at the 1.1300 handle.

I wanted to write today’s post for two reasons. One to point out today’s intraday rally above the 1.1720 area. And two, to explain why the two long-tailed candles on Tuesday and Wednesday were not proper sell signals.

Let’s start with number two first. A few of you asked if the long upper wicks on Tuesday and Wednesday were suggestive of a selling opportunity.

While it is true that both sessions sold off from the 1.1720 resistance area, there wasn’t enough evidence to justify a short in my opinion.

You see, a long upper or lower wick is only part of the equation. The location of the candle and how the wick protrudes from the surrounding price action are key attributes, as is momentum.

Notice how both wicks between Tuesday and Wednesday didn’t manage to break much higher than the September 14th session. In other words, both candles formed in traffic, thus negating any bearish implications.

On top of that, we already had reason to suspect EURUSD might move higher. As I wrote two days ago, the price action since June hints at an inverse head and shoulders pattern. That alone was a reason to second guess any bearish price action here.

Now let’s turn our attention to today’s rally. So far, the Euro has cleared the 1.1720 resistance area on a 4-hour closing basis. That’s a strong indication of the pair’s intent, but as always, the daily close (using a New York close chart as I do) is key.

Given how the single currency has been range bound since late May, I’d feel more comfortable waiting for a daily close above resistance before considering an entry.

Will the pair retest the 1.1710/20 area following a close above it? There’s no way to know for sure. However, seeing that EURUSD is 100 pips above the daily mean as represented by the 10 and 20 EMAs, I would be inclined to wait for a retest of some sort.

A daily close above the 1.1710/20 region would expose 1.1830 followed by 1.1950. You can see how both areas have served as pivots for the pair since May. Alternatively, a daily close below 1.1720 would negate or at least delay the bullish scenario.

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EURUSD inverse head and shoulders

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12 comments
Nwosu Nelson says

Hi Justin. Remember how i said on this platform at the beginnng of September that the EURUSD ended August with a lower pin and a short upper wick meaning the pair would explore upper prices. That has been the case so far now.

Reply
    Justin Bennett says

    I don’t recall, but we discussed the same thing in the member’s area.

    Reply
Will JB says

People interested in this trade should know, DIVERGENCE is present on both stochastics and rsi on the 4 hour chart which usually is indicative of a major move in opposite direction. RSI is also in overbought territory. I use an 8 period, 80/20. The same has happened with gbpusd, usdcad, and usdchf, is close to reversing. Look into it. Daily close will confirm direction ultimately, but in my experience, whatever the market says the market does.

Reply
    Patricia says

    Hi Will, I use the 14 period RSI. I have been watching the divergence as well. I am wondering if the pullback will be a large one but not a reversal.

    Reply
      Will JB says

      Great minds think alike. I hope you got paid.

      Reply
Thanks mentor...I celebrate you. says

Thanks mentor

Reply
    Justin Bennett says

    You’re welcome.

    Reply
Sera says

👍 your analysis is highly appreciated

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Pierre Mifsud says

EURUSD seems to be heading for the 1.18516 handle…..
Regarding the USDCAD you were not right……probably more lows due to the formation of a bearish flag

Reply
    Justin Bennett says

    Trying to be right costs too much money. My job is to protect my capital and listen to what the market is telling me. It’s about staying neutral enough to see the signs that it’s time to abandon an idea, or at least question it. For USDCAD, I alerted members to the September 6th bearish engulfing range long before the descending channel failed.

    Reply
oludare says

Justin you are on point why tuesday and wednessday pinbar is not a sell signal if you check the first touch of the resistance on the 30th august and the tuesday and wednessday touch it didn’t form a lower high instead it form a higher high which negate the condition for sell in my opinion.

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Jake says

I agree with you sir

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