EURUSD back below 1.1000, tests through wedge support

EUR/USD Talking Points:

• The EUR/USD pair has fallen back-below the 1.1000 level as USD strength re-appeared.
• The US Dollar is working on both an outside day and a bullish engulf on the daily DXY bar, indicating a strong response to support that keeps the door open for the longer-term double bottom formation looked at on Friday.
• I’ll be discussing these themes in-depth in the weekly webinar on Tuesday at 1PM ET. It’s free for all to register: Click here to register.

EUR/USD put in a sizable drop during Tuesday trade after another topside test above the 1.1000 handle. The pair made a fast approach at the yearly high that was set two weeks ago at 1.1076, but after falling nine pips short, EUR/USD pulled back by a little more than 100 pips until running into support 1.0966.

At this point, EUR/USD has already posted an outside day on the daily bar, which indicates a full breach of both the high and the low of the prior day. This isn’t quite the same as a bearish engulf, but does have similar hues, and is often be approached with a similar aim of continuation of that momentum. In the current setup in EUR/USD, this highlights deeper support potential at the 1.0943 Fibonacci level that was in-play as support last week.

EUR/USD Daily Chart

EUR/USD Rising Wedge

EUR/USD set its current three-month-low in mid-March, just above the Fibonacci level plotted at 1.0516. That led to a sharp incline that’s begun to slow over the past two weeks as the longer-term zone of resistance around 1.1000 came into play. This allowed for the build of a rising wedge pattern, which is often approached with aim of bearish reversals. This could further strengthen the case for reversal potential in EUR/USD but, again, it highlights the importance of support structure around the 1.0943 and 1.0909 levels.

EUR/USD Eight-Hour Price Chart

EUR/USD Shorter-Term

At this point, EUR/USD lows are holding around the Monday low at 1.0966 and this highlights short-term resistance potential at the 1.1000 handle. And above that there’s Fibonacci levels at 1.1033 and 1.1076 that could also function as resistance, the latter of which is currently marking the yearly high in the pair.

On the support side of EUR/USD, the Fibonacci level at 1.0943 is nearby and the prior swing-low at 1.0909 that had come into play after the pullback from yearly highs comes into the picture after that. If support quickly shows up, then 1.0943 and 1.0966 can come back as near-term resistance potential for bearish continuation scenarios, with follow-through support around the 1.0831 swing low.

EUR/USD Two-Hour Price Chart

--- written by James Stanley, Senior Strategist