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Last week certainly finished with a bang for the Euro as several pairs sold off heavily going into Friday’s close. I’ll admit, I wasn’t expecting such a volatile close to the week, but Friday’s price action did set us up with a few pairs to watch going into the new week.
EURUSD has been in a downtrend for the better part of six months now. The pair has formed several continuation patterns along the way that have presented us with favorable trade setups.
It looks as though the pair is about to deliver again with the market closing last week below channel support. This setup looks eerily similar to the channel that broke on October 22nd, which ended up running for 400 pips before finding any meaningful support.
In addition to the break of channel support, the pair also formed a bearish outside week, giving credence to the idea that the market may see lower levels in the weeks to come.
EURUSD weekly chart
One look at the monthly chart gives us a possible target that should come into play somewhere around 1.2180. This level would also satisfy the measured objective off of the recent bear flag pattern when measured from October 29th high.
EURUSD monthly chart
Summary: Watch for a move back to former channel support, now resistance. Depending on how the market looks during the move back to new resistance, bearish price action may be optional when looking for a short entry. Key support comes in around 1.2180.
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