It’s no secret that I’ve been bearish the EURUSD for over a year now. Even once the pair found a bid in March of last year after the 3,500 pip landslide, the price action that followed had bearish implications which signaled that further losses were likely over the medium to long-term.
I will say that since October of last year, the single currency has been more resilient than I expected. But the recent Brexit has not only caused that resilience to falter; it has completely altered the technical bearings for the Euro versus the US dollar.
The weekly chart below shows what has transpired since early 2015.
As you can see, the price action for the last fifteen months has been nothing more than consolidation following the selloff that consumed most of 2014.
Also, today’s intraday break below trend line support that extends from the December 2015 low reinforces the idea that the path of least resistance points to a move lower from here.
But two things are preventing me from calling this a selling opportunity at the moment.
- Markets are extremely volatile and uncertain on the back of last night’s Brexit vote, making trading any currency pair in the near-term a risky endeavor
- A daily close below 1.1060 is needed to call this a confirmed breakout. Until that time this is all just conjecture.
Why 1.1060?
Aside from it being a key pivot that dates back to early 2015, it’s the 50% Fibonacci retracement when measuring from the December 2015 low at 1.0515 to the 2016 high at 1.1615.
So what happens if EURUSD closes back above trend line support that extends from the December 2015 low? Would that negate the bearish bias?
Not hardly, at least not in my opinion. Unless the pair can gain an extra 250 pips before the close, EURUSD is on track to engulf the previous 33 trading days with today’s price action. That’s a bearish signal regardless of where the current session closes.
In summary, the trade idea needs a bit more time to develop, but a close below the 1.1060 handle would expose 1.0820 and also open the door for a run at the current 2016 low at 1.0710.
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