- EURUSD broke the August high, but failed to close above it (reversal-day)
- Long-term levels standing in the way of higher prices
- Momentum is stalling at big resistance, hinting at possible turn soon
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Heading into last week we pointed out a potentially bearish sequence ahead of the ECB, but shorter-term support never broke, thus leaving us without a full-on sell signal. This turned out to be a good thing, as buyers showed up in earnest on Thursday, and then pushed EURUSD beyond the August high in early Friday trade. However, we saw some give-back and another daily reversal-bar (albeit more modest than the 8/29 bar) was carved out. This suggests we may see some early-week selling, and if we do keep an eye on the trend-line we used as a guide last week. As far as important support goes in the near-term, it holds the key.
Overall, since early August momentum has been waning as long-term levels dating back to 2010 and 2012 have come into play. With a little more time, we could be on the verge of developing a mature rising wedge pattern, which given the major overhead levels, could spell trouble if the underside of the pattern is broken (it could always force a squeeze, so waiting for the break is key). Should we see an eventual break lower the trend-line rising up from the April low will be important support, but given the pattern break and turning point, it may not provide the single-currency with much backing.
The bottom line: The trend remains higher and with that it is hard to be an aggressive seller just yet, but watch for continued failures to maintain new swing highs. And if the beforementioned pattern comes to fruition and brings a downside break then we could be in for a sharp move lower. At this time, the bias leans neutral until we see how price action plays out in the days ahead.
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---Written by Paul Robinson, Market Analyst
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