After a promising start EUR/USD traded to new 2.5-year highs before soft numbers from China and comments from the Chinese Premier, Li Keqiang warning of bankruptcies, saw markets tumble as money flowed back into safe havens.
The Euro Currency basket above (whilst not the prettiest of charts) allows us to use the volume as a proxy for buying/selling pressure on EUR/USD. With the bearish close being the heaviest close since 31st Jan it raises potential for a key reversal on the EUR/USD and for near-term weakness going into the final trading session of the week and also next week.
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The 1.40 target was within grasp before we saw the reversal and eventual bearish close. What makes this particular candle of interest is the volatility of it which when coupled with the heavy volume makes it a likely candidate to be a reversal for the near-term. Early Asia trading has seen continued trading, albeit less volatile, but for now my bias is a break below yesterday’s lows and the 1.3835 support to target 1.3780 support zone (which comprises of horizontal S/R, 38.2% and lower Channel Line).
A break below the bullish channel would warn of a much deeper pullback and to target 1.370.
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