For traders who have been watching the trio of intraday lows along 1.2141 (S1), 1.2143 (S2), and 1.2175 (S3) on the EUR/USD, the wait may be over: prices are rapidly approaching this key support level after a weak close in the U.S. equities markets (and a surge towards 87.50 on the U.S. Dollar index) accelerated prices to the downside. The EUR/USD remains under pressure, but contrarian traders are already looking ahead to a potential bounce from these lows. Any move higher from this level could hardly be considered a reversal, since in reality it would be a correction of the EUR/USD’s recent move from 1.3094 to 1.2143.
However, there is a chance that a move through 1.2141 will invite bears to sell further into the negative market sentiment, which could be problematic thanks to the expected support between 1.2116 and 1.2028 (F). Selling exhaustion just below 1.2141 could allow the bulls to stage a near-term rally; such a rally would in fact present the better opportunity to short from a higher position within the overall downtrend on the daily and 240-minute charts. The prudent move is to trade short-term time frames near these key lows as the bulls and bears battle to see where the floor will hold.