The Chart of the Week: EUR/USD bears await break of critical support

A massive amount of long positioning is being closed in a phase of distribution.
EUR/USD severs its uptrend and bears are set on a sizeable retracement.

Ross J Burland FXStreet

EUR/USD is hugging the 2-month Point of Control, (POC) around 1.1830, supported by trendline resistance.

Last week, we noted the consolidation period in EUR/USD with a focus on the downside:

The Chart of the Week: EUR/USD in distribution, bears waiting for breakout confirmations

Looking to the positioning data, speculators are closing out there long positions in a phase of profit-taking which has seen a huge spike in the data showing an almost -18,000 net change in longs from the prior week of -2,184 and -11,194 before that.

Consequently, this shift in the futures market can be expected to be reflected in the spot market while the price reached its lowest level since mid-August to 1.1737.

Monthly chart

Following a strong monthly and uninterrupted impulse, the focus is on a healthy correction towards a 38.2% Fibonacci retracement level.

Weekly chart

1.15 area on the weekly chart is market by the structure as well as a 38.2% Fibonacci retracement level.

Daily chart

A break of the trendline support will pressure the daily support structure and open prospects of a breakout to the downside.

4HR chart

As illustrated, the market can easily remain in a phase of distribution above the trendline support, although swing traders will be monitoring for a break of structure from a 4-hour perspective.

From a volume profile analysis, there is space between 1.1720 and 1.1350 that guards a high volume area in the lower end of the 1.12 area.

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Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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