Swing levels, 38.2% and the 100 hour MA converging
The EURUSD is lower on the day but is running into a "cluster of support" defined by the (see yellow area):
- 100 hour MA at 1.10531
- 38.2% at 1.10509
- A swing area defined by recent highs and lows on the hourly chart (around the 1.1054 level.
When a cluster of technical levels are in a confined area (in this case a 3 pip range from 1.10509 to 1.1054), you tend to get a bunch of traders leaning against that level. Why?
Risk can be defined and limited.
If traders buy, they can easily put a stop below that level and even reverse their position as the bias tilts more to the bearish side from the bullish side on a break. That is what I mean by saying risk is defined and limited.. Selllers also have a target area that they know they have to get through to give more confidence, the downward correction is progressing.
Since the price is coming from the upside, there tends to be profit takers/dip buyers against the area on the first look(s). That seems to be what we are seeing today. The earlier low for the day (even though it was just above the yellow area) are those buyers too. Note how the price did see a corrective move to the upside off that low. In fact, it rose and ended up testing the 200 bar moving average on the 4 hour chart where traders leaned too (on the sell side). That lean was more bearish.
Overall the bears are more in control. They nevertheless have a battle against the cluster support area.
