EUR/USD – A Decent Level Providing Decent Support

Posted Thursday, November 24, 2016 by
Skerdian Meta • 2 min read

Can you spot the big level today? There are always many support/resistance levels around in forex, but I´m talking about a particular level. OK, the headline gives it away a bit, but which level in EUR/USD?

If you switch to the EUR/USD daily chart, you can see that level. I don´t know how many forex traders realize it, but the 1.0520 level in this forex pair is a big deal. It held the price in April last year and it did the same late in November after the ECB decided to cut the interest rates. If you remember back then, EUR/USD only touched this level for a split second before shooting 400 pips higher in a matter of hours. That tells you how important this level is for this forex pair.

1.0520 is a level we cat ignore 

It did the same today. It briefly pierced this level for a minute but in reversed immediately and it´s about 50-60 pips higher as I speak. This means that the EUR/USD buyers are clustered a few pips around 1.0520 and they see it as a level which offers good risk/reward ratio.

But these levels can also turn into a big open gate if they get broken. If the 1.5020 level goes to the rubbish bin, then that´s where the hopes of the EUR/USD bulls will end up too. If this level is broken, the buyers will give up and will likely turn into sellers, joining the number of EUR/USD sellers which is already vast.

In this case, we´ll see 1.0460 soon, which has been the low for more than 15 years, but which is nowhere near as important as the 1.0520 level in my opinion. The decline to 1.0460 was a quick move during that massive EUR/USD bearish sentiment, while the 1.0520 level provided solid support during normal trading, which makes it the bigger guy here.

If this level holds, then the buyers will become more confident the longer it remains unbroken and the sellers will be discouraged thinking that they have failed yet another time right there. I prefer to trade the break on a retrace, meaning that I will wait for a clear break and then open a sell signal/trade when the price retraces back up to 1.0520.

That´s a more conservator trading strategy, but you can also trade the immediate break. Placing a sell stop about 10 pips below it with a tight stop above 1.0520 is a more aggressive trading strategy and those forex traders whose trading psychology fits it might as well use this strategy. Whatever the strategy, at the end of the day, what counts are the pips. 

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