Both weekly demand at 1251.7-1269.3 and the weekly channel support extended from the low 1122.8 suffered a decisive break two weeks back. In previous reports, we highlighted that this area would likely offer some resistance to the market with it having been a reasonably strong base of demand in the past. Last week’s action shows price actually retested the underside of the area, but other than a mild end-of-week correction, there has been little to report thus far. However, should the sellers slip into second gear this week, we could see weekly price begin to drive down towards a weekly support level at 1214.4.
The bounce from the daily AB=CD 161.8% Fib ext. point at 1238.9 attracted fresh buying in recent trade, pushing the daily candles back up to a daily resistance area coming in at 1251.7-1265.2. Traders might have also noticed that surrounding this daily zone is the larger resistance area mentioned above on the weekly timeframe. Mid-week trading saw the daily candles begin printing selling wicks from within the daily area, which could, technically speaking, portend a selloff this week.
Moving over to the H4 timeframe, a test of the H4 resistance at 1260.8 was seen going into the early hours of Friday’s US session. This was a highlighted level in Friday’s morning report given that it fused nicely with a 38.2% H4 Fib resistance at 1260.5 and is positioned within the aforesaid weekly/daily resistance areas. Well done to any of our readers who managed to take advantage of this move!
Market direction:
While both weekly and daily structure point to a possible selloff this week, shorting into a H4 support level seen at 1251.4 is, we personally believe, not considered a high-probability trade. For that reason, it might be an idea to wait for this H4 barrier to be engulfed/retested before considering a sell. That way, the path south is likely clear down to at least H4 support at 1243.6, followed then by the daily AB=CD 161.8% Fib ext. point mentioned above at 1238.9.