On Friday I discussed a 200 pip range on the EURUSD that could offer an opportunity this week. The idea was to watch for a buy signal on a pullback to 1.2325 or wait for a break above 1.2525.
Then over the weekend I reversed course a bit. Instead of looking for immediate buying opportunities, I said that Euro bulls have gotten ahead of themselves.
Moreover, I wrote that a rotation lower toward 1.2325 and perhaps even 1.2160 is the most likely scenario before bulls push for another leg up.
But I didn’t say why I changed my mind. That brings us to today’s post.
The 4-hour ascending channel that extends from the January 11 low is what caught my attention over the weekend. It’s an established formation and one that suggests a move lower is in the cards.
A 4-hour close below 1.2435 would break support and send the EURUSD toward the next key support at 1.2325. And given the “heavy” price action in this region since Friday, a breakdown seems imminent.
Keep in mind that Mario Draghi speaks today at 11 am EST. It’s unclear what effect his speech will have on the Euro if any, but it’s something to keep an eye on nonetheless.
A close below 1.2435 would expose 1.2325 with a break there paving the way for a move to the 1.2160 handle. Alternatively, a close above 1.2525 would keep the bullish momentum alive and target the next key resistance at 1.2670.