Over the weekend I mentioned the idea that a EURUSD daily close below 1.1060 would open the door to the potential for further weakness toward 1.0820, commonly referred to as the March 10th ECB low.
Not surprisingly, yesterday’s session picked up where Friday left off, putting the single currency below the 1.1060 handle against the US dollar.
For those who missed the Sunday commentary, the 1.1060 level is important for two distinct reasons:
Yesterday’s close should help fuel the recent bearish momentum caused by last week’s Brexit.
But as I also pointed out over the weekend, it’s important not to chase a market that has overextended itself, which could be the case with EURUSD. The pair is currently trading 160 pips below the 10 EMA on the daily chart, signaling that further consolidation may be necessary before sellers are willing to commit to another leg down.
I’ll continue to favor selling the Euro against the USD so long as the pair remains below 1.1060 on a daily closing basis. From here, there isn’t much standing in the way of a retest of the March 10th ECB low of 1.0820 with a break there exposing 1.0710 (minor support) followed by the current 2016 low of 1.0515.
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