EUR/USD has Sliced Through Support Levels this Week
In a week with little on the economic calendar, EUR/USD has broken through many support levels without much effort. Usually, this is a strong indication of weakness.
At the same time, the pair has shown a tendency to pull back every time it pierces to fresh lows for the year. This is best seen on a daily chart below.
Some levels that I outlined in my earlier weekly forecast were 1.1170, 1.1150, and 1.1135. These levels have all triggered a bounce in the pair this week, though recovery rallies from the levels have been relatively shallow.
The level that stood out was 1.1135. While the pair breached below it, it has mostly traded around it since Wednesday’s North American session.
US GDP Data to be Released in the North American Session
I see today’s GDP release out of the United States as the highlight in a week that otherwise did not have much market-moving data.
The release stands to have an impact on the pair, especially if there is a significant deviation. However, I would be cautious of a stronger dollar on the back of the release. Mainly because, as stated above, EUR/USD has shown that it struggles to sustain a breakout. Or in this case, a breakdown.
In addition to the GDP data, other notable releases include weekly unemployment claims, pending home sales, as well as a speech from FOMC member Clarida.
The 4-hour chart shows that there has not been a clear break below 1.1135 support. A sustained break would initially target last week’s low, which is also major support for May and the year thus far, at 1.1109. Some further support, in the event of a search for liquidity, is below the level at around 1.1097-1.1100.
The hourly chart shows the pair holding within a range since the end of yesterday’s European session. To the upside, some minor resistance is found at 1.1140.
It will take a break above 1.1150 to trigger a broader recovery and to entice some of the bears this week to cover their positions. If such an event materializes, strong resistance is found at 1.1170. In addition to the horizontal level, both the 100 and 200 moving averages are in close proximity.
- Because of past price action, I think it’s easy to get trapped positioning short at these levels.
- I like shorting from higher up. As suggested above, there is a nice confluence at 1.1170. If we get there, I may look to position short ahead of next week’s ECB meeting.