Range for month no longer the 3 lowest on record. Yippee
Coming into last week's trading, the EURUSD was trading with a 211 pip trading range for the week (see post speaking about it here). With a week and 2 trading days until a new month, if the price stayed within that range, it would represent the 3rd lowest range since the start of the EURUSD trading back in 1999.
When ranges are unusually low for a period (a day, week, or month), it is a good trading idea to look for an extension. So you pick spots that would give a bullish or bearish clue.
In trading this week, the first clue was more bullish. Support held at the 1.716-24 area. Then the price moved above the 100 bar MA on the 4-hour chart.
However, it is what happened at the 100 bar MA on the 4-hour chart and a swing area at t1.1822-37, that turned the beat around.
At that MA and ares, the price tested the 200 bar MA on the 4-hour chart for the 8th time (see green numbered circles) and stalled against a swing area too (red numbered circles).
The technical resistance stalled at the right spot and the ECB statement and Draghi presser sent the pair south through the 100 day MA (blue lower line at 1.16787) and through the October 6th low at 1.1669. That was a key break.
Anyway, the selling continued on Friday, with the pair bottoming toward the end of the day at 1.1573. There was a last hour of the week rebound back up toward 1.1600, but sellers remain in control.
What next?
Well, increasing the bearishness, is that the price fell below the neckline of a head and shoulder on the daily chart. The measured target would take the price down toward the 200 day MA (green line at 1.1246 currently). With the price around 1.1600, that would be ambitious, but it is on trader's minds
Other targets from the daily chart would be (see red circles on the daily chart below):
- 1.1477-88 area. Swing low and high
- The 38.2% of the 2017 trading range (from the Jan 2017 low) at 1.1422. That would be a key support in the new week
- 1.1392. That is the underside of the broken trend line (see daily chart). It moves higher each day
- 1.1282-1.13098. That is the yellow swing area on the daily chart
- 200 day MA at 1.1246. (also near the H&S measured area).
What would keep the bearish trend in tact (or reverse the market back to the upside)?
All the downside targets are discredited, if the price next week starts to trade back above the broken old swing low for the month at 1.16689, and back above the 100 day MA at 1.16787 (it will be a little higher on Monday). A move above that area, would also discredit the breaking of the neckline on the daily chart.
A move above that area, and the shorts should start to cover on the big break failure. We could instead, see a rotation back higher.
Finding strong support against one of the lower targets, could also turn the price around a bit. I would expect, that the 38.2% at 1.1422 should provide decent support on the first test. Look for some buying on a dip there with the chance for a modest correction. However, if the level is broken look for stops and a continuation of the downside momentum.
Ultimately, when/if the 200 day MA is tested, look for strong buyers.
