1.07 Under Threat in EUR/USD – What Comes Next?
What has been the most notable break for you guys? For me, it was the break of the long term resistance level in EUR/CHF at 1.10 and the break of 110 in USD/JPY which will come soon, judging by the strength of the uptrend.
But another very important break will be the collapse of the 1.07 support level in EUR/USD. The 1.08 level in EUR/USD has been a strong support level throughout this year, but that is history now and the 1.07 level is the next target for EUR/USD sellers.
The lowest price this year comes at 1.0711 on my MT4 platform in January, but that´s been broken as well so the 1.07 level is the last man standing for now. The price dipped below it a couple of times already today, but they can´t be considered as proper breaks unless this forex pair closes below it today.
Let´s suppose the price will break this support level, since it will in a matter of time, judging by price action. The price has been stuck around here for the last few days and the pullbacks have been getting smaller every time, besides the extreme bearish sentiment, so I´d be very surprised if this doesn´t happen soon.
There are some good pips to be made here
From the weekly EUR/USD chart above, we can see that there aren´t any decent support levels nearby until 1.0520. I expect the 1.0500-20 support level to put up a decent fight, depending on the pace of the decline when we get there, but until then, the chart is empty. No moving averages and no support levels.
So if 1.07 goes, then the road is open for 1.05, 10.460, and finally parity. In this case, a good trade idea would be to place a sell stop around 1.0680 with a tight stop around 1.0725 and take profit target in the 1.0530 region.
We pointed out in one of our updates last week that the long term chart pattern in this forex pair looks very bearish and the fundamentals are bearish too, so the downtrend might extend below 1.0530 where the initial take profit target should be.
However, in order for this trade to unfold, the 1.07 level has to go soon. If it isn´t broken in the next few trading session, then the sellers would panic and close their trades, thinking that there is some big money defending this level. I´d prefer to sell this pair if the price retraced higher to 1.09 probably, but it looks too far now.
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