Many traders got faked out on last week’s brief down spike that set a marginal low for the year. The question is whether EUR/USD is currently offering sellers an opportunity or if the pair is attempting to form a base.
The price action that stood out last week was when EUR/USD made a marginal break below the April low to set a nearly yearly low. However, the move was not sustained. The price action that followed seems to suggest that bears selling a potential breakdown covered their position quickly.
The level I’m focused on, and I presume many others, is resistance at 1.1259. A break above it would imply a double bottom and can signal a much broader recovery.
There is also the upper line of a descending trend channel that has encompassed price action for most of the year. Currently, the two are creating a confluence.
A double bottom points to a measured move target of 1.1415. Personally, I don’t see that happening at this point. The pair has shown range bound type price action for several weeks. There also seems to be a lack of a catalyst for such a move.
There is not a lot on the economic calendar this week, and there is a bank holiday today in the US. I expect a technical break, if one were to occur, will happen next week.
The ECB meeting takes place then and is more likely to present a catalyst. In addition to the ECB, US jobs numbers will also be released. In the meantime, a range seems probable for the week ahead.
The 4-hour chart shows important upside resistance at 1.1217. There is confluence as the 200-period moving average is within close proximity.
On an hourly chart, upside momentum is quite evident from recent price action. I see a notable resistance level at 1.1217 as mentioned. There is some minor resistance just above it at 1.1229 which I expect would contain any spikes. Initial support is at 1.1183 and then 1.1170. The main support level to watch out for this week is 1.1150.
I’m anticipating a range in the week ahead so it makes sense to me to fade extremes. EUR/USD would need to get above 1.1259 for a clear bullish bias. On the other hand, a break below 1.1135 signals selling pressure.
Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.