The EURUSD pair at the beginning of January reached the level of 1.2350, establishing almost a 3-year maximum. From this level, the price steadily declined to reach the round level of 1.2000 today.
- bullish engulfment at strong support
- upward divergence on MACD
- attention! – payrolls – Friday 14:30
On the H4 chart an upward outside bar formed a bullish engulfing pattern. The minimum of the candle forming the formation – commonly called the “mother” candle – is located at the above mentioned level, which is also a strong support and resistance level (S/R).
The appearance of the formation is accompanied by the establishment of the minimum on the MACD, the oscillator begins to rise, which may be a signal for the correction of the recent declines, especially since the upward divergence appeared.
On the H1 chart we also have an upward divergence, which increases the probability of an upward breakout from the formation (marked with a red rectangle).
To sum up, the following factors support the upward scenario:
– bullish engulfment at the strong S/R level
– upward divergence on H4
– upward divergence on H1
Only permanent defeat of 1.20 may negate the upward scenario. It is important to remember about an important macro event that may have a large impact on the price of the analyzed pair, which will be Friday’s payrolls. Today’s employment data from ADP were very good – instead of the expected 49 thousand, 174 thousand were reported.
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