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On Friday EUR/USD printed a ‘doji’ pattern, showing neither the bulls nor the bears had the edge (highlighted on the chart). Effectively this shows indecision in the market, especially at trend highs.
It makes a lot of sense for the pair to undergo indecision at such a key level (1.3833 – the 61.8% retracement of the 2011 to 2012 sell-off); until I see a closing break of this retracement I won’t look to be long. While I am prepared to accept a worse price, sometimes it pays to get confirmation that one party is in control (bulls or bears) and let momentum take the pair up to my target.
It’s interesting to see the overnight US pending home sales and any suggestions that higher mortgage rates are not having an effect on the property market seem mistaken, as the data print fell 5.6% on the month. The declines were felt more pronounced in the Northeast and Midwest, falling 9.6% and 8.3% respectively. On the other side of the coin we saw good US industrial production numbers and this offset some of the negative sentiment around the housing numbers, which could in theory could have ramifications on future existing homes sales.
In US trade later today we get US retail sales (expected to be unchanged), while US consumer confidence and the Case-Shiller house price index are also due. In Europe we get Spanish retail sales.
Given the indecision on the cards I might look at short positions tomorrow if the pair closes below Friday’s low of 1.3775, with an aggressive stop loss.
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