EUR/USD Approaches a Major Barrier
Following a momentum-driven decline in the early part of the month, EUR/USD has gained some ground and is recovering on the back of some broad-based dollar weakness.
However, I think the pair will struggle to cross a major barrier that falls at 1.1072. If it fails to do so, I expect the markets will continue to focus on the downside.
The mentioned level is important for several reasons. First, this price point has been well-respected on a daily chart. It has acted as both support and resistance since the pair first declined towards it in late August.
But more importantly, the level marks the breakout point of a double pattern that has been in play for just over a week now. The measured move target for the pattern falls at 1.0970. Last week’s decline fell about 20 pips short of reaching it.
I’m not ruling out the possibility that the pair has made a meaningful bottom at this point. And along the same lines, that it will not complete the pattern. But having said that, it might be premature to start looking at the long side.
As it stands, I suspect EUR/USD will face some selling pressure after testing 1.1072. This is just a big resistance area considering what I’ve mentioned above.
In addition to that, the 200 and 100 moving averages on a 4-hour chart are also near the horizontal level. Further, the 100-day moving average is just above it, currently at 1.1093.
About a week ago, I mentioned that I was hesitant shorting EUR/USD because of the bullish monthly print for October. Therefore I’d still like to consider getting long this pair but I would need to see a bullish break above resistance and then I would look to get involved on a pullback. In the meantime, I think it makes sense to maintain a bearish to neutral near-term bias.
- EUR/USD is showing some upward momentum after finding support in around the 1.10 level.
- A horizontal level at 1.1072 offers major resistance. I expect that the pair will struggle to scale it, at least in the session ahead.
- A sustained break above 1.1072 stands to shift the near-term bias back to bullish, in line with the price action and trend from October.
This article was originally posted on FX Empire
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