has been steadily decreasing in recent days, as the bulls had trouble overcoming the orange resistance zone. The pair has ended its losing streak with Friday’s rise, however. Does it mark the end of its decline, or is there more to come?
Let’s recall our Wednesday’s commentary on this currency pair:
(…) recently attempted breakout above both the upper border of the rising green wedge, and the upper border of the orange resistance zone. It has been invalidated, though. The fact is that invalidation of a breakout is a bearish development.
Additionally, both the CCI and the Stochastic Oscillator have generated their sell signals, which increases the probability of upcoming deterioration.
The exchange rate is however still trading inside the blue consolidation and the rising green wedge. A bigger move to the downside will be more likely and reliable only if the bears push below the lower borders of both formations.
Should we see such price action, the way to the early Nov. lows will be open.
The situation has indeed developed in tune with the above, and the pair’s move lower has made our short positions more profitable.
Yesterday brought us a breakdown below the lower border of the rising green wedge, which is a bearish development. This is especially the case when we factor in the sell signals generated by the daily indicators and yesterday’s breakdown below the lower border of the blue consolidation.
Then, there is also today’s tiny move to the upside, which looks like a verification of yesterday’s breakdown below the consolidation. All in all, the short positions are justified from the risk/reward perspective, and it seems we won’t have to wait long for the bearish scenario to be realized.
Indeed, yesterday’s breakdown below the green wedge has opened the way to even lower levels. Should break below the support area created by the recent lows (marked with two horizontal lines on the above chart) the way to the green support zone created by the early-Oct lows and the 61.8% Fibonacci retracement would be then up for grabs.
Interestingly, this is where the size of the downward move would correspond to the height of the rising wedge, which raises the likelihood of the bears cashing profits in this area. In other words, should we see reliable signs of the bulls’ weakness there, we could move our current profit target lower. It’ll be interesting, so stay tuned.