EURUSD Retest of Support Watching for a Breakout
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I’m going to get started today on the Euro versus the US Dollar [EURUSD]. Starting here on the Daily Chart, we could see, over the past several days, we’ve seen a fall for the EURUSD, as it started all the way up here into the 1.3900s, began pushing lower. We pushed through the longer-term uptrend line, the blue trend line that you see here on the chart. We pushed through the 100-day moving average. That’s the green line that you see here on the chart, several days ago. We continued to pressure down as we pushed through the blue-shaded area, which represents historical supports. You could see the support here. You see support here. So, we made a new lower low as it pressured underneath that blue zone.
The past few days, we saw a rally underneath that blue zone as resistance and now a new challenge of the lows here into the pink-shaded area. So, clearly the bears have been in selling pressure here for this currency pair over the past several days. Today we see the market challenging our last spike low. The last spike low, we had some news last week that drove the market all the way back down here towards the 1.3500-level. Bounced back. That’s when we challenged back into the blue zone and now we’ve seen a retrace all the way back down into the low-1.3500s, down here towards this pink-shaded area.
I also have a Fibonacci retracement measurement on this chart, from the low right here. The last time we were into the pink-shaded area. That last low to the highest high that you see here on the chart puts the .886 fib right at 1.3535. That’s the top of our pink-shaded area. So, currently that’s our support. We’re holding there. As long as it holds above there, potential to rally back higher, into resistance today for the EURUSD. If we can break underneath this pink-shaded area, our next support will be down here into the bright green-shaded area, into the 1.3400-level.
Follow that back in time and that really just makes sense back here. You could see the resistance and support into the pink zone. You can see the resistance and support in the green zone. And not a real whole lot of support and resistance in between there. Now, there will be some intraday bumps in the road between the pink and the green zone, but I think if we can get underneath here, we’re likely turning back down towards the green zone and a continuation of the downtrend.
So, if we’re wanting to trade in that direction, if we think, “Well, we’re in a downtrend right now and that’s the direction we want to focus our efforts in,” then when do we trade it? When do we sell it in that direction? Well, I think you want to sell into resistance. So, for the day today, I’m looking for a rally back into resistance. The orange-shaded area to become the next selling opportunity here for the EURUSD.
Not only that orange-shaded area historically has shown some congestion and support here, some support back here on the left, and even resistance on the left-hand side of the orange-shaded area. Not only that. We find the .786 Fibonacci retracement level of that same previous trend range. The uptrend from that low here in the pink zone to the high puts the .786 right at 1.3587, so that becomes our resistance for the day today. Of course, as I’ve mentioned, the support is right now into the pink zone. If we’re going to look for a continuation of the downtrend, we’ll need a break of that pink zone and the next support becomes the green zone. If we break above the orange zone, of course the blue-shaded area and higher become our next potential resistance targets, but I think today the orange-shaded area is something that we’ll want to focus in on.
Let’s go ahead and zoom it in one time here on the daily chart. Not only are we seeing support here into Fibonacci and the pink zone. Not only do we expect resistance here into the orange-shaded area, where the .786 of the previous uptrend is. We also have a red trend bar with the Forex Black Book, which also gives us a bearish bias for this currency pair. And really, I say this all the time in the Trade Room, what we need to see for the Forex Black Book, if we’re going to sell it in the direction of the red trend bar, the bear market here, we want it to go up. We want it to challenge to resistance, then give us a sell opportunities, selling arrows on the 4-Hour Chart. That becomes our best opportunities for the Forex Black Book.
So, actually, I would like it to go back up, closer towards the 1.3580s. That gives us a better selling opportunity. Remember: buy low, sell high. Well, that tells us all about that. We want it to go up, sell it, and then we look for another challenge and target back down to the pink zone or lower. The risk becomes smaller. If you were to sell it now, your risk is very large above the orange zone. If you wait for it to go up to the orange zone, your risk becomes much smaller. Your profit target, the pink zone is very close right now. It becomes much farther if you wait for it to go up to the orange zone. So, all of that makes sense. If you’re looking to sell this right now, this doesn’t become the most attractive place to sell the EURUSD. Only a rally back to resistance.
Does that mean I would buy it right now? I don’t think so. I think the trend, the bias is down. I have no reason to buy this right now, but most likely looking for the rallies into resistance to sell this currency pair and another challenge of our current support. Let’s do one other thing before we go down to the 4-Hour Chart. Let’s take Fibonacci from the current resistance high, the high all the way at the top of the chart, down to the current spike low. And in doing that, we find the .236 fib right at 1.3622. That’s just a hair above the orange-shaded area. That’ll be definitely something interesting that we’ll want to pay attention to over the next several hours if we see that challenge back to the orange-shaded area.
Next, let’s push down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, none of that outlook changes. Of course we’re still looking at the orange zone as resistance. We’re looking at the pink zone as support. And we could see the market bouncing off the pink zone. So, if you did take a buy here, I suppose you’re looking for continued profit as it pressures back to the orange zone. We see yesterday’s bank flow levels right here into the orange-shaded area, which, again, confirms that if it goes back up there, we’re looking for selling opportunities as it challenges into resistance and likely the bank flow levels.
Again, if we’re looking for a new sell signal with the Forex Black Book, we’d like it to go up. We’d like it to challenge into historical supports as resistance. Give us a couple of red arrows. Here’s a red arrow up here. Give us another red arrow to give us another entry or sell opportunity for the EURUSD. Zoom it out a little bit. You could see the bear market that’s been in control for the past several days, as it’s continued to pressure back down here to the pink zone. We really need a breakout if we’re going to see a continuation lower, underneath the pink zone for that push back down into the next level of support. That green zone that happens to sit way down there at the bottom of the chart here for the EURUSD.
So, for the day today, my expectation is selling rallies to resistance. Likely the bank flow levels. Likely this orange-shaded area. Likely the Fibonacci in there will give us that resistance we need for the continuation lower. Now, the risk in that scenario, and of course there’s risk in every trading scenario, is that it breaks above there and continues back to the blue zone, so appropriate risk management strategies should be taken if you’re going to trade the orange-shaded area for the EURUSD today.