A bullish breakout above the previous consolidation zone between 1.2400 and 1.2800 was performed on July 15 (shown on the weekly chart).
A significant bearish rejection was observed around 1.3450. Hence, another consolidation range was established from 1.3450 down to 1.2800.
On December 7, a bullish breakout above 1.3450 (the upper limit of the recent consolidation range) enhanced the bullish side of the market. Hence, a bullish visit to the resistance level of 1.4120 (Fibonacci Expansion 100%) was executed.
Bullish persistence above 1.4150 enhanced the bullish side of the market towards 1.4650 (141.4% Fibonacci expansion) where an evident bearish rejection was expected (a bearish engulfing weekly candlestick).
The recent bullish recovery was manifested around the level of 1.3750. That is why the current bullish pullback is taking place towards 1.4000 again.
The level of 1.4120 (Fibonacci Expansion 100%) remains a significant key level to be watched for price reactions. It may offer a valid sell entry on the current bullish pullback, which is taking place this week.
On the other hand, the price zone of 1.3370-1.3400 remains a significant support zone to be watched for a valid buy entry if enough bearish momentum is maintained below the prominent weekly support level of 1.4000.
Trading recommendations:
A valid sell entry can be offered in the area around 1.4120 (Fibonacci Expansion 100%) if the current bullish pullback continues above 1.4000. S/L should be set as a daily closure above 1.4150.
On the other hand, conservative traders should wait for a bearish pullback towards the zone of 1.3370-1.3400 for a valid buy entry. S/L should be located below 1.3320.
The material has been provided by InstaForex Company - www.instaforex.com