In a perfect technical fashion, the bears took control of the EURUSD yesterday. Look at how the pair dropped steeply when it hit the 50% Fibonacci retracement level, which coincidentally lines up with a broken resistance level. Notice also the bearish divergence – price was making lower highs while stochastics was forming higher highs. The important thing to watch now is whether support at 1.3850 will hold or not. If we see a 4-hour candle close below this level, a move towards 1.3800 or even 1.3700 is likely. On the other hand, if support holds, the pair could start forming a trading range between 1.4000 and 1.3850.
Almost the same setup could be found on USDCHF, a pair which is viewed as inversely correlated to the EURUSD. Notice how 1.0500 was able to hold as a resistance-turned-support level, helping price bounce from it and shoot back up! We also saw a bullish divergence, as price registered higher lows but stochastic showed lower lows. If buyers come out in force, we could see them push price up to test the recent high at 1.0644 and possibly further. On the other hand, if sellers decided that they haven’t had enough, they could try to break the 1.0500 support level once again.
Let’s zoom out a little bit and take a look at the daily chart of the USDCAD. Looks like that former falling trend line is holding as support now, as price bounced off after touching it yesterday. Not to mention, it seems like support at 1.0570 is holding up. If buying pressure remains strong, they may try to push price back up to test the resistance at 1.0720. On the other hand, stochastic is still in overbought territory, so sellers may start jumping in now. If sellers come back in full force, they could once again attempt to break the support lines to bring price back down to 1.0440.