EURUSD rallied strongly in 2023 and is reaching the critical upside resistance of the 1.11500-1.12000 zone. This is for now seen just as a pullback retrace and a retest of a broken strong downside resistance as can be seen on the monthly chart below. It is also reaching the mid zone of 50-60% Fibbonacci retracement of a recent swing down.
The weekly EURUSD chart is showing a huge rising wedge and the price action is getting squeezed for a directional move. The lack of a significant break above 1.15000 could open the door for a possible reversal lower and a test of 1.08500 which is a downside resistance. Now only a break above 1.120000 will invalidate the short-term downside, and a break below 1.08500 is required for a nice short trade in the coming week.
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As the famous trader says…
“Limit your size in any position so that fear does not become the prevailing instinct guiding your judgment.”Â
Joe Vidich
How to trade this?
Obviously, for Q2 2023, we have this upside resistance of 1.12500 which should be broken higher for an upside continuation. This means that now short trade entries have some advantage over long trade entries as the overall long-term trend is still in a downtrend and five waves down are not yet finished. You should open a short trade here first. The risk to reward on this trade is higher than 1 and the timing of the trade could be on Monday NY session with the stop loss above 1.12500 to target the first 1.0600 and if broken 1.0000.
