The pair broke the range after trading inside of it for one whole month. After the breakout last Tuesday the follow-through to the downside was fast, the pair fell through the first support level (1.1040) with ease and quickly reached the second support level we discussed at 1.0950.
Now, there are several warning signs that put the continuation of the downtrend under question:
- 1.0950 is a very strong support area
- The height of the September range is 150 pips and the drop after the breakout is 170 pips (close to 150). We know that when horizontal channels are broken the move is very often equal to the height of the channel
- The support trendline of the downward channel (blue lines) is also near the current levels
- Several Fibonacci levels are also nearby
With that in mind, it pays to be at least cautious about adding to shorts or selling at current levels. If the pair breaks below 1.09 then maybe you can look to sell with a target to 1.08 or lower.
EURUSD Daily chart – Finally cracking lower!
The pair looks a bit oversold on the 4h chart, although the downtrend is strong also. The weekly pivot point stands at 1.1050 which was a support zone that the pair broke on the way down. This, combined with an oversold RSI which is also showing a bullish divergence between its reading and the price swings, strengthens the case for a near-term bottom that we discussed on the daily timeframe.
Still, though, the pair may just decide to continue moving down and we must be prepared for such a scenario as well.
Nothing much here this time, except this roughly formed channel. We can see the Fibonacci extensions from the last swing and the 1.618% extension is near current levels adding to support.
The very last downswing seems very steep indicating continued strength of the downtrend. This is one sign in contrast with all the others that suggested we are near a bottom in EURUSD.
Judging by the last swing’s fast price action to the downside a break below 1.0950 would not be surprising.
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