Moving down to the , we can see that a very clear bear pattern begun forming last week. As we mentioned in Friday’s report, our sell zone for this formation is fixed between the 127.2% Fibonacci level at 1.1197 and the 161.8% at 1.1387. As can be seen from the chart, there has already been a slight reaction to the underside of this area, forcing the single currency to test support below it at 1.1122. Despite this small sell-off, we still believe this is in play as it has not yet fully completed in our opinion.
With that being the case, we firmly believe that the daily painted above at 1.1385-1.1332 (the upper area of our sell zone which also sits within the above said weekly supply) is by far the more logical sell area at the moment. Shorting from the 127.2% would have required an enormous stop loss – not really what we were looking to get into on a Friday if we’re honest.
On to the H4 chart, Friday’s employment report came in worse than expected at 151k initially spiking prices to fresh highs of 1.1244 before collapsing down to lows of 1.1108. Unless we see further selling this week of course, the H4 will be taking a back seat as our focus remains on the daily supply mentioned above.
Something to watch for on the H4 though, which may give us a clue this week as to whether our daily supply will be hit is a close above psychological resistance 1.1200. Conversely, should the market close below the small H4 demand at 1.1065-1.1080, we can pretty much conclude that our daily zone will not likely come into play this week and then look to reassess our position.
Going into the new week, our orders remain the same – a pending sell placed at 1.1330 and a stop just above our daily zone at 1.1395. As of now, the first take-profit level can be seen on the at 1.1122 which was hit on Friday.
Levels to watch/live orders:
• Buys: Flat (Stop loss: N/A).
• Sells: 1.1330 Pending order (Stop loss: 1.1395).