The EUR/USD is trading lower on Thursday. The intraday chart pattern indicates a potentially bearish closing price reversal top may be forming. This
The EUR/USD is trading lower on Thursday. The intraday chart pattern indicates a potentially bearish closing price reversal top may be forming. This doesn’t mean the trend is getting ready to turn lower, but it could be an early indication that the selling is greater than the buying at current price levels. It confirmed, this could lead to the start of a 2 to 3 day break.
The main trend is up according to the daily swing chart. Earlier today, the EUR/USD smashed through the August 24, 2015 main top at 1.1712 before the rally ran out of steep at 1.1776. The buying dried up and the selling increased on this move enough to turn the market lower for the day.
The selling was also strong enough to drive the EUR/USD back under the previous main top at 1.1712 which suggests today’s earlier breakout was fueled by short-covering and buy stops rather than new buying.
If the selling pressure continues, we could see a test of another old top at 1.1616 and eventually the short-term 50% level or pivot at 1.1544.
Based on the current price at 1.1697 and the earlier price action, the direction of the EUR/USD is likely to be determined by trader reaction to 1.1732.
A sustained move over 1.1732 will indicate the return of buyers. This could generate the upside momentum needed to take out 1.1776.
A sustained move under 1.1732 will signal that the selling pressure is increasing. This could lead to a test of a pair of uptrending angles at 1.1658 and 1.1632, followed by 1.1616.
The daily chart opens up under 1.1616 with the next target 1.1544.
Watch the price action and read the order flow at 1.1732 the rest of the session. This price is controlling the direction of the market today. A close below it will produce a closing price reversal top.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.