EUR/USD Uptrend Testing Critical Fibonacci Levels at 1.21 SupportDespite the bullish breakout above the resistance trend line, price action is reaching a resistance zone that could send price lower again.
Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary. A Product Disclosure Statement (PDS) can be obtained either from this website or on request from our offices and should be considered before entering into a transaction with us. Raw Spread accounts offer spreads from 0.0 pips with a commission charge of USD $3.50 per 100k traded. Standard account offer spreads from 1 pips with no additional commission charges. Spreads on CFD indices start at 0.4 points. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Despite the bullish breakout above the resistance trend line (dotted orange), price action is reaching a resistance zone that could send price lower again. Let’s review.
Price Charts and Technical Analysis
The EUR/USD wave patterns remain the same for the moment. The current bullish swing is probably a wave A (grey) of a larger ABC in wave B (pink).
- We expect that the wave A (grey) could run out of steam soon. Either now (orange arrow) or a bit higher around 1.22-1.2250 (green arrow).
- The breakout below the support trend line (green) could confirm a bearish ABC pattern.
- The main target of the bearish ABC is the support level (blue box) that could create an inverted head and shoulders level (blue arrows).
- This ABC (pink) could complete a wave 4 (purple).
On the 1 hour chart, price action made another push up. This invalidated our bearish analysis yesterday. But despite our bearish view, the confirmation of the breakout on the 4 hour chart never occurred. Instead price action broke above the Fractals (purple box), which we indicated were key for one more bullish push up. This is why using confirmation and invalidation is critical for trading and we can see its purpose this week:
- Now price action could be in a final wave 5 of wave 5 on 3 higher degrees.
- But price action must remain above the top of wave 1, otherwise this final 5th wave is invalidated.
- A strong bearish push (orange dotted lines) could confirm a reversal lower finally.
- A bullish bounce at the 21 ema zone and Fibonacci levels could indicate another bullish swing.
The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter
For a look at all of today’s economic events, check out our economic calendar.