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The EUR/USD pair failed to break through the variable support yesterday before the local lows from October 7 and 8 (1.1725 and 1.1732). As a result, there was a rebound with price consolidation above 1.1750.
In this case, we should pay attention to the two factors that helped the euro to reverse its rate:
1. A technical rebound from the area of interaction of trade forces, which occurred at local lows on October 7 and 8. To simply put, the natural basis of a rebound.
2. A correlation between EUR/USD and GBP/USD pairs. Let's start with the fact that correlation in trading is the relationship of trading instruments (currency pairs), where if one currency rises/falls, then the other can repeat its dynamics, given that there is a connection between them – correlation.
Yesterday, the price of the pound actively rose, against the background of Brexit information. Due to the positive correlation, the Euro turned its direction. As a result, we could observe its intensive strengthening by 10:00-12:00 UTC+00.
Regarding the quote's current location, you can see that it has returned to the range of 1.1750 once again, where it formed stagnation at 1.1740/1.1760. In our case, the most important coordinates are the level of 1.1725 (low on October 7) and 1.1770 (yesterday's high). Now, a price consolidation beyond these values may indicate a subsequent move in the market.
Based on the location of the quote and control levels, you can make a trading forecast from a number of possible market scenarios.
First, an upward movement.
An upward movement may develop if the price consolidates above yesterday's high of 1.1770, which will provoke buyers to increase trading volumes. In this case, the price movement in the direction of 1.1800 is not excluded.
Second, a downward movement.
Market participants are trying to restore the downward trend and face indecision, which leads to the formation of a side range of 1.1725/1.1760. Moreover, there will be a main flow of sellers after the price consolidates below 1.1725 in the four-hour (H4) time frame.
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