In my last post on the Eur/Usd I highligted a critical range for the pair and the price is still in this range. However the most recent events that occured on Friday could send the pair right through resistance to new highs.
The first thing we must acknowledge with this pair is that we are in a stong uptrend and also that the dollar is in trouble. I will be including some charts with the Dollar index to help us get a better idea of the big picture.
The reason I say the dollar is in trouble is because the dollar index tried to rebound on Thursday and Friday and we had a failed rebound. Some people were beginning to get optimistic on the Dollar and some positive articles were coming out. The price of the Dollar was rising verses all pairs when the Non Farm Payrolls (NFP) and the unemployment rate announcement came out at 8:30 am Est time. Then about an hour and a half later some more news about construction spending dropping and the Dollar took a crazy dive the entire market reacted to that news and drove the price down to test the most recent lows. If you look at the Dollar chart below you will see that the dollar was trying to break to the upside and then a sharp drop. That is a bearish signal that says the market is not ready give strenght to the Dollar just yet.
The pinbar on the daily chart suggests more losses in the near future and also the quick and violent reaction to the negative news is also another strong bearish signal for the Dollar. The support below is the rising trendline, watch the rising trendline to see if the price will keep moving lower.
The reason I showed the Dollar index is because I believe this pair is driven by the Dollar. The Euro Zone Economy is weak right now as well and if the Dollar begins to rebound this pair will drop quickly. As of Friday we will probably see more gains because the close on Friday is near the weekly highs with the price looking to break out to the upside.
If the resistance level gets broken then we could see the pair move to the 127% fibonacci extension level of 1.4665. iIf we see a strong daily closing level of current resistance of 1.4250 then that would likely be a good place to put a long breakout trade on. Also keeping an eye on the Dollar index charts to see if the price of the Dollar breaks new lows and if both of those events happen then the trade could be a good long term play.
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