After breaking outside of the large multi-month channel, the pair is now in some sort of a horizontal channel, consolidating after the volatility spike from the Brexit event. Longer term, it still makes sense to trade this pair from the short side because of the clear bearish signals on the daily timeframe. However, to unfold that scenario may take its time, and we could see another leg higher in EURUSD, possibly to now fully retest the large channel from the other side. Analyzing the price action can help determine the true nature of the trend, so if the pair starts to move up with choppy slow price action, then we can be sure it’s just more retracement of the larger downtrend that is intact.
We zoom in on the consolidation here, and you can see the Fibonacci extensions from the first leg up drawn on the chart. The 100% extension is slightly higher than the current level of the lower trendline of the large channel on the Daily and Weekly timeframes. Will the market go that way we can’t be sure at the moment as the thing with ranges is that you never know until the price breaks out of them. So, waiting for a breakout will be a good strategy here as well.
Here, we can see how price was rejected at the lows and now it finds itself right at that resistance trendline drawn on the chart. It could prove as key resistance because it was tested so many times. A breakout to the upside will most certainly open the way for the price to reach the top of the channel and even the 100% Fibonacci extension we talked about on the 4h chart.
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