EURUSD hit 1.16 last week after the FOMC meeting. The bear now looks more assured of re-establishment. Price started this week with a weak rally ahead of US manufacturing data coming today and US employment data coming at the end of the week.
EURUSD was strictly resisted at 1.18 last week as the market waited for the FOMC rate decision. Price broke below the technical neckline and has dropped further since, as the market read a positive sentiment for the USD. Price sank below 1.16 shortly before closing above it, to end last week. At the beginning of the London session today, price has been trading above 1.16 in what looks like a short and weak bullish recovery. The ISM manufacturing PMI data coming later today might cause a bit of deflection but the employment data coming at the end of week might cause bigger move. Positive U.S data releases would aid EURUSD bearish move much faster but a positive data will be expected to lead to higher bullish correction. What are the emerging price pattern and the important price levels to watch out for?
EURUSD: Technical Overview and Important price levels
In the last update, we expected price to drop way below 1.17 up to 1.15. Price was reluctant to break above 1.18 to continue the bullish correction after breaking above the neckline a bullish head and shoulder price pattern. The chart below was used in the last update.
Just at the top of the neckline, there is a bearish wedge pattern which has just completed but requires a price confirmation. With this pattern, EURUSD looks bearish. The nearest barrier for the bears is the neckline. A bridge below the 1.1720-1.1735 neckline would be a required confirmation. If the breakout is significant, price will be expected to drop to 1.1550-1.1525 support level. On the other hand, if price persists above the 1.1720-1.1735 neckline and advances to 1.18-1.1815 once again, the bulls might win finally and send price toward 1.2.
Price took a higher swing close to 1.18 the third time, resisted again and dropped below the 1.1720-1.1735 neckline to 1.16. What could happen next?
From the 1.18-1.1815 support zone, the chart above started a new bearish impulse wave. The current bullish recovery looks corrective and was labelled the 4th wave of the decline that started last week. The rally could be limited at/below 1.1655 before the drop to 1.1525 bearish target of the last forecast. Only a strong break above the 1.1720-1.1735 would invalidate this forecast and probably lead price to another retest of the 1.18-1.1815 support zone.
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