I was asked by a friend about my views of the EUR/USD. So wanted to share what I said to him here. I will keep it very brief, but first have a look at this EUR/USD chart showing price action on H1, Daily and Monthly time frames:
Monthly is currently displaying a doji candle. The month before it had created a hammer bull candle. Now if that candle was suggesting rates were going to go higher, the rounded retest of the hammer head around 1.1095 should have held as support, but didn’t.
On the daily, price has broken below key support around 1.1050-1.1100 area (shaded). Also below the 200.
Clearly the path of least resistance is currently to the downside. So I think the bulls are trapped.
Where do I think price is heading next, you might ask?
Well, they teach you to place your stops below or above major swing points. The most recent significant low was made at 1.0778.
Where do you think rates might be heading if the bulls are indeed trapped? Most likely where the big stops will be resting from trapped market participants.
So, if I had to make a calculated guess, I would say that the EUR/USD is mostly likely heading below 1.0778 from here.
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