Weekly closing price: 1.2203
The euro was seen flexing its financial muscle once again last week, gaining over 170 pips. Weekly price crushed weekly resistance at 1.2044 (now acting support) and ended the week closing just ahead of a weekly (black arrows) 161.8% Fib ext. point at 1.2222. Extra credibility is given to this line not only because it is situated on the weekly scale, but also since it merges closely with a weekly broken Quasimodo line at 1.2287 and a weekly resistance taken from the low 1.1641.
In conjunction with weekly structure, the shows that price closed the week within the walls of a nice-looking drawn from 1.2246-1.2164 formed back in late 2014. Should the market rotate lower from here this week, keep an eye on the daily broken Quasimodo line seen at 1.2070. A violation of the current supply, on the other hand, would likely open up the path north to a daily broken Quasimodo line at 1.2359 (not seen on the screen).
A quick outline of Friday’s move on the H4 timeframe reveals that the 1.21 handle was engulfed, allowing the unit to test and marginally close beyond the 1.22 handle. In the event that the bulls maintain a position above 1.22 this week, the next upside objective can be seen at 1.2276: a H4 broken Quasimodo line. Also worthy of note is the newly formed H4 demand base coming in at 1.2111-1.2134.
Last week’s upside move, fundamentally speaking, was likely due to the ECB delivering a set of minutes on Thursday that bolstered a more hawkish view this year. On Friday, there were also reports that Germany’s CDU/CSU and S/D parties reached a preliminary deal on a formal coalition, further supporting the single currency.
With weekly price trading nearby strong-looking resistances, and daily action also seen interacting with a , the tone of this market could potentially turn sour this week.
The H4 close above 1.22, albeit marginal, should, however, still be a concern for sellers as this could indicate a move up to at least the H4 broken Quasimodo line at 1.2276. For that reason, we feel 1.2276 may be a more stable level to consider selling.
This would also lower the stop-loss distance, as the logical place for stops is above the noted daily broken Quasimodo line. Here’s why we think this. H4 buying above 1.22 targets 1.2276. This consumes stops above daily supply and ultimately clears the way north to 1.2359. Of course, though, price may not reach this high since there is a weekly broken Quasimodo line sitting at 1.2287. Call it a CONSERVATIVE stop, if you will.
Data points to consider: No high-impacting news events on the docket; US banks closed.
Areas worthy of attention:
Supports: 1.2044; 1.2070; 1.2111-1.2134.
Resistances: 1.2287; 1.2222; weekly resistance; 1.2359; 1.2246-1.2164; 1.2276.