Climbing down into the pits of the , one can see that the week ended closing below both support drawn from 1.0955 and a support extended from the low 1.0711. In view of this, there is a strong possibility that the at 1.0809-1.0886 will be the next target in the firing range this week. Should price reach this area, we highly anticipate a bounce since the weekly support at 1.0796 is seen bolstering this zone from just below.
Moving in a little closer to the action, the H4 chart shows that the market (backed by a positive U.S GDP number on Friday) responded beautifully to resistance coming in at 1.1059. This, as you can see, dragged the pair through both the large psychological support 1.1000 and also the huge chalked up at 1.0937-1.0984, before stabilizing around demand fixed at 1.0903-1.0928 by the week’s end.
In light of the higher-timeframe action (see above in bold), and the fact that there is now a large area of resistance overshadowing the current H4 demand, the most we’re expecting from here is a small intraday bounce at best today.
If our analysis is correct, price should push below this area which would likely set the stage for a continuation move towards the Quasimodo at 1.0809-1.0826. To trade this move, we’d need a retest to the underside of the current demand as supply followed by a lower timeframe sell signal. However, caution is still advised here since let’s not forget that even though the weekly’s downside path is clear, the top-side of daily demand at 1.0886 could potentially halt selling here.
In regards to buying this pair this week, the only place we feel would give a big enough bounce to the upside would be the aforementioned H4 Quasimodo area. Not only is it lodged within the extremes of daily demand, but it also sits just above both weekly support (see above for levels) and also psychological support 1.0800. Therefore, there is likely going to be a fakeout seen below the H4 area before buyers step in, as such, we would recommend waiting for the lower timeframes to confirm buying strength exists before risking capital here.
Levels to watch/live orders:
• Buys: 1.0809-1.0826 Tentative – confirmation required (Stop loss: dependent on where one confirms this area).
• Sells: Watch for bids to be consumed at 1.0903-1.0928 and look to trade any retest seen thereafter (lower timeframe confirmation required).