Our analysis last Monday ended with the following prediction:
1. A cautiously bearish bias.
2. A daily close above 1.6250 will be extremely bullish.
3. A daily close above 1.6177 near the daily high will be bullish.
4. A daily close below 1.5884 will be very bearish.
5. A daily close below 1.5954 will be bearish.
6. There is an opportunity for a long touch-trade at the next test of 1.5884.
7. A bullish reversal on a short-term chart off the 1.5954 level could be a good opportunity to go long.
The price did touch 1.5954 yesterday but there was no bullish reversal on the short charts at that level. Last night there was a daily close exactly at 1.5954, which is as close as possible to a bearish sign as per the previous prediction, but this only happened a few hours ago so it is too early to judge. However the cautiously bearish bias has proven correct as the price has fallen by 91 pips since the week opened and 190 pips since this week’s high on Tuesday, as at the time of writing.
Turning to the future, let's start by taking a look at the daily chart, as there has not been a weekly close since the previous analysis:
We can see there was a sharp move down at the end of last week (marked at 1), with a bearish reversal candle on Thursday followed by a strong down candle on Friday which closed hard on its low. Monday and Tuesday this week then produced two small pull-back candles that closed near their highs. Yesterday then produced a strong bearish reversal candle that closed in the lower quarter of its range (marked at 2).
This pattern is strongly bearish, and is here even more so, as it comes from a fall from a known strong resistance level at around 1.6250.
The major worry we have is that we have not yet broken yesterday's low, as at the time of writing. There is also a support zone not far below the price from 1.5890 to 1.5880.
Nevertheless, it would definitely be wise to have a short bias now. Long-term traders may wish to go short at a break of yesterday's low, with a stop loss above yesterday's high. Shorter-term traders could wait for a pull-back after a break of yesterday's low.
A break of yesterday's high coming before a break of yesterday's low will be a bullish sign, and invalidate the strong bearish bias that is recommended now.