EURUSD Breaks Channel: Navigating the Next Move

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ForexInflux
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The EURUSD pair has recently broken below the rising price channel visible on the 4-hour chart. This development has brought the pair face-to-face with a critical support level at 1.1097, leaving traders questioning whether this is a temporary pullback or the beginning of a more significant reversal.

Key Levels to Watch

Support

  1. 1.1097: This is the immediate and crucial support level. How the price reacts here could determine the short-term direction.
  2. 1.1070: If 1.1097 fails to hold, this becomes the next support target.

Resistance

  1. 1.1100: The initial hurdle for any potential recovery.
  2. 1.1201: A key resistance level, representing the recent high.
  3. 1.1300 and 1.1450: Extended targets if bullish momentum resumes.

Potential Scenarios

Bullish Case

Despite the channel breakdown, the broader uptrend from 1.0777 may still be intact. Here’s what could support further upside:

  1. If the price holds above 1.1097, the current decline might be viewed as a consolidation phase.
  2. A break above 1.1100 could trigger a move towards 1.1201.
  3. Clearing 1.1201 opens the door for a push to 1.1300 and potentially 1.1450.

Bearish Case

The channel breakdown introduces caution. Here’s what could signal a deeper correction:

  1. A decisive break below 1.1097 might indicate that the uptrend from 1.0777 has completed at 1.1201.
  2. In this scenario, expect support to emerge around 1.1070.

Trading Implications

  1. Range Trading: In the short term, traders might consider range-trading strategies between 1.1097 and 1.1100.
  2. Breakout Opportunities: Watch for decisive breaks of key levels (1.1097 to the downside or 1.1100 to the upside) for potential trending moves.
  3. Risk Management: Place stops based on your chosen scenario. For bullish trades, stops below 1.1097 might be prudent. For bearish trades, consider stops above 1.1100 or 1.1201, depending on your risk tolerance.

Conclusion

The EURUSD pair is at a critical juncture following its break below the rising channel. While the broader uptrend from 1.0777 may still be in play, the channel breakdown introduces an element of caution. Traders should closely monitor the reaction around the 1.1097 support level, as it could provide valuable clues about the pair’s next significant move.