The EURUSD has seen some aggressive selling in the last two weeks off the back of a very large bearish rejection candle. This ‘straight line’ move on the daily chart has now crashed into a critical support level. The fast paced movement has also caused the EURUSD to ‘gap’ away from its mean value. The rubber band effect comes into play here, the further price moves away from the mean, the higher the tension is to ‘snap back’.
Considering we are now resting on the critical support of the 1.3700 area, this could encourage a bullish response from the market and kick off a mean reversion. If the situation does play out as such, we will be waiting for short signals to develop at the next resistance level, which was previous old support.
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