After consolidating between 1.10 and 1.11 for a couple of days earlier this week, following the initial sell-off on the back of the ECBs easing warning, the euro tumbled against the dollar again on Wednesday as the Federal Reserve delivered a more hawkish than expected statement.
Having fallen back to 1.09 yesterday, the pair ran into support from the ascending trend line – 13 March lows – and has since stabilised again. However, following a brief period of consolidation and some GDP data that was roughly in line with expectations, the pair may be about to fall again.
The last completed candle on the 4-hour chart is a shooting star which is typically quite bearish. However, the pair has been rallying since this candle formed which could tell us just how bearish it is.
If the pair rallies and takes out the high of the shooting star, it would suggest to me that the market is not currently as bearish as the candle would suggest. At this point I will continue to look for signs that the pair is about the reverse back to the downside.
If on the other hand the pair fails at or just below the high, it would suggest we could see another move lower. A move below the current candle low would then further support this.
If we see this then we could see a challenge of yesterday’s lows, a break of which could prompt a move back towards the May and July lows around 1.08, where the pair could find strong support.
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