EUR/USD – Weekly outlook 17 Oct – 21 Oct
October has seen the bulls taking charge of the market recovering much of the losses seen in the latter part of September when we saw fiber finally breaking out of its 5 month trading range. Although bullish momentum has been strong for the past two weeks, price action on the charts suggests this move could be a ‘pull back’ and we could once again see the bears taking hold in the coming days/weeks.
The daily charts show strong upper resistance that potentially could prove to be a barrier in any move higher for the EUR.
From May – Sept eur/usd was stuck in a 500-600 pip trading range with the market bouncing of upper resistance and lower support showing no clear direction. Mid way though September we finally saw the pair breaking out of the range and pushing lower. We can now see the market pulling back towards the lower end of the range, which could prove to be a strong resistance area.
The lower end of the range was at 1.3950 – 1.4000. As you can see from the chart above the market has respected this area in the past. When the market initially broke out of the range we did see a retest of the ranges support which proved to be solid resistance. We are once again nearing to this resistance area and could see another bounce and push back lower.
A closer look on the dailies further confirms that 1.3950-1.4000 may prove to be a strong resistance area as it is between the 50% – 61.8% Fibonacci retracement levels. Drawing our fib levels from the most recent and relevant swing high to swing low shows the 50 & 61.8 levels tie in with our resistance area mentioned.
We will be waiting patiently for any price action rejection bars to form at this resistance area and looking to short this market back down to recent lows. However it is possible we see the bulls continuing to show their recent dominance and pushing the market back into its previous range. Should this occur we will be looking for bullish price action signals at 1.3950-1.4000.