Last Friday I mentioned a trend line on the EURUSD that could trigger the next round of selling pressure. The level that extends from the 2017 low at 1.0340 connects with the April 2017 low and was responsible for the May 30th bounce last month.
Another level I pointed out on Friday was the 1.1720 resistance level. Here’s what I wrote last week:
I wouldn’t be surprised to see the pair struggle at 1.1720 given last week’s impulsive selloff. Moves like the one last Thursday tend to leave a lasting impression which means the EURUSD could have a difficult time trying to claw back recent losses.
Note that the high on June 26 was 1.1720. That’s the most buyers could manage following the June 14 impulsive selloff.
Now, there is undoubtedly some support just above the 1.1500 handle. The buying pressure around this level started in late May and helped the June 21 session close back above the 2017 trend line.
However, as long as the EURUSD stays below new trend line resistance near 1.1600, I will remain bearish.
Key support comes in at 1.1300 followed by 1.1120 and 1.0860. Keep in mind too that the April 2017 gap from the France elections could act as a magnet. Gaps of this size tend to attract attention and in this case, can serve as support once closed.
A move of over 800 pips from current levels may seem unreasonable, but then not many were anticipating a 700 pip drop following the breakdown I wrote about on April 20th either.
Keep in mind, however, that such a move will take weeks if not months to play out. Alternatively, a daily close (New York 5 pm EST) back above the 2017 trend line near 1.1600 would delay the bearish outlook.