EURUSD bears are on the move again.
Yesterday’s close below the 1.1300 handle is another sign that the single currency intends to weaken further.
It’s the second indication that the November relief rally has run its course.
The first sign was the November 20th close back below the 1.1430 key level. That session, by the way, carved a bearish engulfing day.
You can even see how EURUSD retested 1.1430 as new resistance on the 22nd before losing momentum once again.
One thing I pointed out in Sunday’s forecast was the possibility that the recent price action has formed an inverse head and shoulders.
It certainly wasn’t the most likely scenario, but it was something to keep an eye on nonetheless.
Yesterday’s close below 1.1300 may have extinguished that possibility.
If this were an inverse head and shoulders, I’d expect 1.1300 to hold as support. Look no further than the August 15th and October 31st lows to see why.
Of course, that didn’t happen.
Instead, sellers closed the euro at 1.1287 yesterday. That means 1.1300 is now resistance. We saw sellers defend it as such earlier today.
Keep in mind that the 10 and 20 daily EMAs are lagging today’s price by 60 pips. That means we could see sideways movement before the next leg lower materializes.
Also note that we have some key speeches from Fed Chair Powell and ECB President Draghi over the next 24 hours followed by the weekend G20.
But as long as EURUSD holds below 1.1300 on a daily closing basis, the euro will remain under pressure.
I use New York close charts so that each session closes at 5 pm EST. Click here to get access to the same charts I use.
Key support comes in at 1.1215 followed by 1.1125. Alternatively, a daily close back above 1.1300 would negate yesterday’s breakdown and re-expose 1.1430.
I’m not ignoring the fact that the French election gap from April 2017 remains open. The pair would need a 1.0725 print to close that gap which is 550 pips below today’s price.
That could become a significant factor as we enter 2019.
It’s a long way down, I admit. But then I don’t think many suspected a 1,000 pip drop following my April 20th commentary earlier this year either.
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