On Friday of last week, we looked at a trend line on the EURUSD that extends from the current 2017 low. It was unclear at the time whether or not the 1.0590 area would become a factor.
Buyers appear to have held the line into Friday’s close. However, yesterday’s session failed to gain any traction and closed right near the trend line at 1.0594.
So even with almost 48 hours of trade since the last commentary, it’s still unclear whether the pair is reacting to this trend line or not.
As I mentioned in a previous lesson, whenever there is ambiguity surrounding a key level I like to take a wait-and-see approach. More specifically, I watch to see whether the market respects the area into the New York close at 5 pm EST.
In the case of the EURUSD, I would need to see a daily close near 1.0596 to keep the immediate downside pressure intact. But even if buyers manage a close above this area, they will still need to deal with the 1.0635 handle which will likely attract an influx of offers if tested.
I’m sitting this one out for now, but I’ll be keeping an eye on the price action into today’s close at 5 pm EST.
Note that the holiday week has created a liquidity drain hence the somewhat limited movement across the majors. Keep this in mind especially as we approach some of the event risk later this week as it could impact volatility as well as spreads.
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