The pair has pulled off the low of the range (1.4800), and looks prepared to move back higher to test some former highs.  This will either be confirmed or rejected based on movement through the following levels:

A move back above 1.4890 indicates movement back above 1.4900 and a test of recent swing highs at 1.4930-1.4940.  We have trendline support above this at 1.4950-1.4965, this will also act as resistance.  Beyond is resistance at 1.4980-1.4990.

Keep in mind that old support and resistance become new resistance and support respectively if a level is moved through and then retreats back.  Movement through one level indicates movement to the next, and failures are likely to move back to other levels mentioned.  Support and resistance does not mean rates will move exactly to the price mentioned, rather they are profit taking opportunities in those areas (or  possibly entry prices if moved through) as retracements are more likely around those levels.  This is misunderstood by many traders, and I will elaborate on it on an upcoming post on my blog.

A drop back below 1.4840 is our first indication of a move lower.  The trend line this move would break is short term and not of high importance.  The closest major level is 1.4800.  A break below that would be significant.

A break below 1.4800, if it is legit, will find support at 1.4770, 1.4740-1.4730 then 1.4700.  If the break is not legit and just a stop run, it will likely tucker out by 1.4780-1.4770 and then reverse.  I say that only we because we all know there are a pile of stops sitting down there.

Keep in mind that since we know stop hunting is a common practice, whether intentional or not, and is a strategy in and of itself.  If there is a level that is likely to have many stops it, it seems to create a gravitational pull and can result in a quick surge but often retraces.  Watch and see if you see this happening around critical levels.  If there is interest I can post an article on how to trade this phenomenon.  (This is exactly what I said in the previous post, just in case it seemed familiar).  Have a great day trading everyone!

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Cory Mitchell, CMT
Chief Market Strategist
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