Last Monday's analysis ended with the following straightforward predictions:
1. Bias should remain bullish for the time being
2. A retracement to the 1.3450 level would be a good opportunity to go long
3. Progression to the zone between 1.3600 and 1.3700 would be a good opportunity to go short
Measuring these predictions against what actually happened shows a pretty accurate result: although last week was a down week, the major moves were bullish both in terms of pips and impulsiveness (except for the move down on Friday afternoon, which seemed quite strongly impulsive). The price did not quite reach 1.3450, but the weekly low was only 11 pips above that at 1.3461, so the prediction identified the bottom support very accurately. The high of the week was 37 pips below the level of 1.3600, which was identified as a good level to go short.
Turning the future, let's start by taking a look at the weekly chart below
Last week was an inside week, it also looks by eye to be the smallest range week we have had in this pair for at least two years or so. The action was bearish and most of this bearishness was decided on Friday, when the price rose up and then fell sharply just as quickly as it rose, ending the week down, after the two recent bullish weeks. The potential support at 1.3450 held without the price reaching that level exactly, as noted previously.
Let's drop down to the daily chart now for greater detail:
Last week began with two consecutive down days, but Wednesday produced a bullish reversal (1). Thursday was a bearish inside day (2), note that the low of this day has not yet been broken. The week ended with Friday as a bullish engulfing day (3), but with a lot of selling pressure in its upper wick.
The daily action indicates indecisiveness and the possible ending of the bullish trend. We have two weekly highs overhead from the last two weeks very close together at around 1.3560. We also have two daily lows below us at about 1.3460, so short-term support and resistance are both well defined.
It is hard to make any meaningful predictions with this pair, beyond that it looks like the resistance will hold overhead, if not at 1.3560 then at around 1.3600. It is quite likely that the pair will simply consolidate for a while, so in the absence of any meaningful news one workable strategy might be to range trade the 1.3460 – 1.3560 zone.
There will probably be better action elsewhere over the next few days.