Important: This site uses New York Close Forex Charts so that each 24-hour session starts and ends at 5 pm EST. These charts are essential for trading price action.
EURUSD buyers have made a significant comeback so far this week.
After a 1.1128 close on Friday, the pair has snapped back more than 80 pips in the last 24 hours.
And that’s precisely why I didn’t short the pair at 1.1180.
I wrote about this level last week and again on Sunday. Given the close below the level on April 24th, it was reasonable to assume it would serve as new resistance.
But there was a problem with this week’s retest of 1.1180 as new resistance.
Put simply, it occurred too quickly.
I often talk about the importance of a rounded retest. Just as the name implies, it’s when a market retests a level while carving what amounts to a half circle.
When that happens, it’s an indication that there is less supply or demand above or below the area in question.
In the case of EURUSD, the immediate retest of 1.1180 as new resistance signaled there was substantial demand below the region.
That isn’t what you want to see if you’re considering a short position.
I even told Daily Price Action members that I wouldn’t be shorting EURUSD on Friday.
Here’s the comment I made in the EURUSD member’s forum:
That illustration shows the difference between an immediate retest and a rounded one.
At any rate, it’s a good thing we didn’t sell at 1.1180.
As I write this, the EURUSD is nearly 50 pips above 1.1180 on an intraday basis.
A daily close above this region would be suggestive of strength. It would also expose the April highs at 1.1320.
However, don’t discount the odds of a close back below 1.1180 just yet.
Remember that I use New York close charts. That means each 24-hour session begins and ends at 5 pm EST.
That will be key here!
If the EURUSD closes the day back below 1.1180, we could have a bearish pin bar on our hands.
And although the lack of a rounded retest isn’t ideal, a close below 1.1180 should be enough to trigger a move lower.
So, for now, this is a waiting game.
A daily close above 1.1180 would be indicative of short-term strength while a close below it would re-expose 1.1110 and perhaps 1.1050.