ICmarkets

EUR/USD: Weekly technical outlook and review.

FX:EURUSD   Euro Fx/U.S. Dollar
106 0 2
Weekly TF.

Last week saw the sellers positively close below the weekly demand area at 1.32940-1.34847, and is now being seen testing the weekly demand area at 1.31037-1.32262. We could be seeing higher prices from here this week; however, we have to be prepared for the possibility of a deeper test within the aforementioned weekly demand area first. Let’s take a look at the lower timeframes to see what’s inside this weekly demand area.

Daily TF.

Here on the daily timeframe price still remains trading between the daily S/R flip level at 1.33559 and the daily demand area below at 1.31037-1.31755. To the left of current price action, we see very little that will likely cause a problem to price from dropping deeper into the weekly demand (levels above) towards the aforementioned daily demand area. So, with the above in mind, according to this time frame we could yet see a decline in value deeper into the weekly demand area before higher prices are indeed seen.

4hr TF.

The buyers did indeed make an attempt to trade to the round number 1.33, but failed, making a high of 1.32955, and this is the point sellers regained control and pushed prices south. The buyers around low marked with an arrow at 1.32409 have more than likely been stopped out i.e. consumed, and the next area of interest (the round number 1.32) has yet to be hit.

Considering the next area of interest has yet to be hit, we may have a trade opportunity on our hands. If price does rally back up to the round number 1.33 early this week, before hitting the round number 1.32 below, there is a very good chance we could see active sellers around the 1.32883 area that may push prices down to the round number 1.32.

Let’s just assume this does happen, this would mean we have seen lower prices into the aforementioned weekly demand area, nonetheless, how much deeper can price go before higher prices are seen?

Just below the round number 1.32, there is a neat-looking 4hr demand area at 1.31559-1.31879 (if price reaches here, we are now trading deep within the weekly, and daily demand areas – levels above), think for a moment how many stops are going to be around this round number, there will be an unimaginable amount! So, if pro money decide to fake this level into the aforementioned 4hr demand area, this will likely give pro money the liquidity (in this case sell orders for their buys) to push prices higher. However, say there are not a lot of stops around this level, well not enough to give pro money the required amount of liquidity, we could then very well see a push down to the next 4hr demand area below at 1.31037-1.31278 (very deep within the aforementioned higher-timeframe demand areas).

Taking into consideration all of the above, we believe if a bearish reaction is seen around the round number 1.33 level, price will likely be trading deeper into weekly demand (levels above), however, if we see a push above the round number level, we will then be considering looking for longs.

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