Looking at short-term chart since 17th April, one can easily draw the conclusion that EUR/USD is in a firm downtrend below 1.32. Bulls were mostly kept at bay below 1.3025 resistance (previous support from April 18 – 23rd) and a test on the aforementioned ceiling was made during London hours, with bears quickly put the uprising to rest, sending price lower. US session opened with more good news for bears, as Durable Goods Orders unexpectedly fell -5.7% M/M, dragging EUR/USD further down towards the current floor of 1.2975.
That was the golden opportunity for EUR/USD bears to go for the jugular. The setup was perfect – Intersection with descending trendline + support/ceiling. Fundamentals support the direction which price was already heading into. This is as good as it gets, and in fact bears who have entered on the pure technical intersection bearish signal at the blue dotted line (or enter at the next candle for confirmation) would have been in a tidy profit (25-35 pips, rather decent for a short-term swing trade) after the Durable Goods Orders news.
However, the bearish breakout didn’t happen, but instead 1.2975 held and allowed for bulls to fight back valiantly. Perhaps there were already signs that hinted at the underlying strength of the bulls – Just 2 candles before sell signal, price actually traded below 1.2975 after German IFO survey went down lower than the analysts estimates. However, bulls were able to pull prices up to bring us to 1.3025 shortly after that. This development should have been a fair warning sign that underlying bulls are strong yesterday.
Right now, price has broken the 1.3025 line and is heading towards the 1.305 interim resistance, which may impede bullish movement back to 1.31. However if price is able to break the level, we could see bullish acceleration towards 1.31 and potentially allow price to even takeover the swing high on 19th April.
The ability to extend current bull run will be essential to push back current bearish pressure. The decline from early Feb appears to be still in play, and despite the fact that price has broken higher than the descending trendline, it doesn’t inspire confidence as price has done that and even break the 1.315 support/resistance before ultimately falling short at 1.32. With this uncertainty, it is possible that price may simply trade within the 1.3 – 1.315 levels similar to what we’ve seen in early Jan. Bulls will need to break the 1.32 hoodoo in order to banish current bearish bias, and should that happen we could see acceleration towards 1.34 and ultimately 1.37 2013 High.
Bottomline: We could be on a bullish breakout, but we may need further confirmation to ensure that this is different from the recently seen bull trap from the Daily Chart. From the Hourly Chart, price could still be trapped within the 1.3025 – 1.31 level. Some may regard the potential 75 pip gain as a “breakout” but opinions surely divide on this definition.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.