What happens now after Wednesday's break lower?

Something had to give eventually on the EURUSD range and it surprised me to see the lower end of the range break so quickly after repeatedly pushing the upper bounds.

That's why we should concentrate on what the price does rather than what we think it will do.

As you know recently, 1.1330/35 - 1.1400 was the range I was looking at, with extensions to 1.1300 and 1.1450. Always my number one rule with ranges is that you don't trust a break until its been confirmed.

We were given clear confirmation of the breaks of both 1.1330 and 1.1300 at 1.1325 and 1.1290/95

EURUSD 5m chart

That did not happen when we broke 1.1450

EURUSD 5m chart

For trading breaks those contracting actions can mean the difference between being right or expensively wrong on a trade. In this case the drop from the highs was swift.

Range break confirmations aren't a 100% accurate signal that the price will or won't move in the expected direction but then there's no signals that do that 100%. What it does give is a signal that we potentially have a stronger level that we can reduce or limit our risk at. The price has said "I've broken here and I'm not going back above or below it...right now". That signal is a potential money maker, and money saver, if traded right and it works, or if traded right and it doesn't.

So what now for EURUSD?

The range break hasn't been huge, which given how long this top around 1.1400/50 has been running, means there's further scope to see a further move south.

EURUSD H4 chart

All that depends on how we do on a retest of the upper levels, if we get one. Right now 1.1300 is the second support line that broke and held and so it's the first to be tested the other way. Get over that and the bigger level sits at 1.1330/35. I suspect we'll see that to start being protected again around yesterday's high. Once again, look for break confirmations if it happens.

The downside has found support around 1.1235/45 and I've had some pegged at 1.1215. Looking at the wider picture the 38.2 fib of the Dec swing is down at 1.1096, which again highlights that this break isn't anything special just yet while we're far from testing it. Nor does it change the trend that's been in place since then.

If you're not long from lower down, going long here doesn't make much sense so watch for these intraday levels to develop and give the best places to get in. Shorts or short lookers will want to keep an eye on the upper levels highlighted to get in or get out, depending on the PA.

I had a nice little run of shorting the 1.1400/50 levels and if I see the same pattern developing here at 1.1300 I might look to play the same quick pip strategy.