The EURUSD on Monday of this week reached up to test the 38.2% retracement of the move down from the July high to the October low near 1.07642. A high price on Monday reached 1.0756 just 8 pips short of that key target.
After a trend-like move (like the market in the EURUSD saw from July to October to the downside), on the correction move back higher (like we saw conclude on Monday), traders need to get back above the 38.2% retracement. Failure to do that and the buyers are not winning. The sellers are more in control.
So the peak against the 38.2% retracement gave sellers the opportunity to push lower and they did this week.
The move lower – which bottomed today – saw the pair test its 200-hour moving average (green line in the chart below) on the dip. Buyers have been leaning against that moving average today. He remains a barometer in the short term for either increased bearish bias on a break below, or increased bullish bias if the level can hold. Having said that, on the topside today the following 100 hour moving average – currently at 1.0693 – has held resistance.
So if the 200-hour moving average does hold support, the price will need to get above that 100-hour moving average to open the door for a potential one back toward the 38.2% retracement.
Overall for the week – and part of a roadmap going forward – the 38.2% retracement on the daily chart held resistance. Bearish. However, the move off of that high is so far holding support against shorter-term moving average (200 and moving average.
The technical levels are known. Traders will make the decision which way it wants to break against those levels.
This article was written by Greg Michalowski at www.forexlive.com. Source