EURUSD Tumbles Following Retest of 1.2070

by Justin Bennett  · 

January 8, 2018

by Justin Bennett  · 

January 8, 2018

by Justin Bennett  · 

January 8, 2018

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On Friday I mentioned the 1.2070 resistance area on the EURUSD. It’s a level that capped last year’s advances in both August and September and eventually triggered a 540 pip slide.

Despite taking some heat on Thursday and early Friday, sellers stood their ground. The recent selloff has taken out last week’s low and is now carving fresh lows for the new year.

At first glance, this recent decline may seem a bit unexpected. Yes, the pair was likely to encounter selling pressure at 1.2070, but there wasn’t a bearish signal to go short.

Or was there?

The sloping flag is one pattern that has quickly made its way to the top of my list. It’s different than a bull or bear flag in that it forms with the trend rather than against it. As such, it represents exhaustion much like a rising or falling wedge.

In my opinion, the sloping flag is the most underestimated chart pattern in existence. It just doesn’t get the attention it deserves.

Here it is in action on the EURUSD 4-hour chart:

EURUSD upward sloping flag on 4-hour chart

Notice how the flag (or channel) formed with the uptrend following last week’s retest of the 1.2070 area. Also take note how the EURUSD retested former channel support as new resistance before dropping 50 pips on Monday.

I mentioned this very exhaustion pattern on Friday in the member’s area. At the time the pair was trading at 1.2033.

So where might the pair go from here?

I’m watching to see how the single currency reacts to 1.1940 support. But I’m not interested in buying the Euro given Monday’s aggressive decline. Unless of course, we get some bullish price action that warrants consideration.

Although we may see a few bids develop at 1.1940, a more substantial support, in my opinion, is the 1.1875 handle. The horizontal level also intersects with the trend line from the November 2017 low. I’m much more interested to see what happens in this region.

This post is merely an update to the latest weekly forecast. But the real message here is to give sloping flag patterns a second look in 2018. They’re an effective way to spot reversals and make a great addition if you currently trade similar patterns.

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EURUSD support and resistance on the daily chart

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  1. Thanks Justin. Just Woke up Late In The Night And was Very Happy To See This. Another Pattern Added To My Technical Gears. Thanks Once Again.

    1. Absolutely! The sloping flag is an incredibly effective reversal pattern, just like the rising and falling wedge.

  2. Can you make a comment on AUDUSD? Some time ago you have written that “Alternatively, a daily close (New York 5 pm EST) above 0.7820 would expose 0.7880 followed by 0.7955.

    Now it closed above 0.782 and this morning tested it. But the problem is that in 4h chart it is vissible that it tested a trendline starting at Jan 3 which was broken Jan 8, and after test, bounced down to 0.78147.

  3. Mr. Justin, EURJPY is currently testing the 134.40 resistance turned support. Do you think it is another opportunity to go Long

  4. Hi Justin, in this case, isn’t it necessary to have at least three touches on either support or resistance lines of the sloping channel for it to be a valid breakout? Thanks.

  5. Great analysis as always Justin. With bullish sentiment for the dollar on the floor, we could get some rapid moves. Are you following the EURCHF? I would be interested to see your analysis on this pairing. Thanks

  6. For me it was the inside bar of Friday last week. After chilling for 3 days at key level, something was bound to happen. And the retrace was kinda of expected…

    Unfortunately I don’t do patterns, just simple price action signals with a bit confluence.

  7. Thanks Justin. In my opinion, I think it will test the wedge support @1.1850 before the bulls take over again, this time breaking the 1.2070 level (resistance)

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