-EUR/USD trades in the 1.1166-1.1188 resistance zone
-SSI favors a break higher; OBV suggests continued range bound conditions resulting in a mixed technical picture
Previously, we wrote how EUR/USD has been trading in a tight range and that we anticipated the range would continue. Prices have subsequently bounced off those lows and are pushing into horizontal resistance near 1.1166-1.1188.
If this level were to break, then the door is opened to the topside of the trend channel near 1.13.
If prices are rejected in the current 1.1166-1.1188 zone, then look for 1.1090 and 1.0960 to be the next levels of potential support.
Chart created using FXCM’s Trading Station
Zooming out for a big picture look, the May 3 – June 23 move is an equal leg zig zag pattern. This pattern typically falls within corrective patterns which suggests the whole pattern is likely to be retraced to the 1.16 high down the road.
There are some instances where the zig zag is found in an actionary move of a motive wave. If that were the case here, then it would suggest a large diagonal pattern to the downside. We are too early into this potential pattern to confidently suggest it as an option. We would need to see more price action to play out.
Looking to other indicators such as sentiment, SSI has plummeted on the price increase today and currently sits at -1.85. This suggests there may be more top side move available. A price break above the 1.1166-1.1188 range would align the trade with SSI.
On the other hand, volume has been muted as noted through On Balance Volume (OBV). OBV has hardly budged for the past month which is indicative of a range bound environment. Even today’s push higher didn’t add much by way of volume.
Bottom line is that we have a mixed bag of technical indicators and no real clear picture is being painted. A trader, therefore, can pull the Grid Sight Index out of their tool box to see what the intraday momentum is looking like in this 1.1166-1.1188 price zone. If momentum appears to be moving higher while SSI is moving lower, then the trader can shift to a breakout strategy.
If GSI is shifting lower while SSI is shifting higher, then the trader can maintain the range bound strategy of selling high and buying low.
Biggest reason EUR/USD traders lose? This could be why.
---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU
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