- Market participants continue to look for the April 24 gap to fill
- Very substantial support in the low-10800s stands in the way of a gap-fill
- Looking higher there is plenty of work to be done, this week may be a consolidation week between levels
See what's driving EURUSD this quarter, check out our Q2 forecast.
Ever since the first round of the French elections, market participants have been calling for a filling of the nearly 200-point gap. And while it is true, gaps have a tendency of filling, they don't necessarily do it right away. Gaps can fill in a day, a week, a month; and in some instances, it can take much longer. Three weeks have already passed and the euro continues to defy the notion it must fill the gap. This is not to say it won't do it sooner rather than later, but as long as support in the low 10800s continues to hold, no gap-fill can be expected. That might be stating the obvious, but bids continuing to come in near the same level is creating a clear line-in-the-sand for traders to work with.
There is something to this area in the low 10800s - it's been in play on numerous occasions as both key support and resistance for nearly two years. And now, not only is there solid price support, but the 200-day MA (10831) is providing further underpinnings.
From a tactical standpoint: Traders can continue to lean on support, and should it give-way then we can look for a fill of the gap. Should 10821 break it will likely happen quite quickly. But waiting for the euro to sink into the gap first is a prudent approach for playing these scenarios, not predicting that it will do-so from levels which are well above a strong area of support.
Looking higher, EURUSD still has its work cut out for it. The 'gap-and-trap' last Monday following the Macron victory came at a trend-line which has two (now three) important connecting points - the 2016 high and the day Trump surprisingly won the U.S. presidential election. With the third inflection point coming on yet another important event, the line's importance has grown even more-so. It might take some time for the euro to break through, if it does at all, but if enough sponsorship can be found to push it through the trend-line, 5-month old upper parallel, and 'Macron-high' - there is plenty of upside potential.
This week some more defending of the gap might be in order, and on a break higher we might see EURUSD fail to push through tough resistance, but looking at the intermediate-term picture a period of consolidation might be just what it needs to eventually put together a run. Or, the market will get its wish and support will break, resulting in a gap-fill.
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---Written by Paul Robinson, Market Analyst
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