Recently, the 1.0775 area, which has become support, is starting to play a significant role on EUR / USD. The daily chart shows its importance very well.
The first, very strong reaction in this place we saw around February 20, when the panic associated with the potential effects of lockdown began to spread in the markets. The dollar was losing strongly then, to return to the starting point a moment later and even break the low. When the market returned quickly over it, the 1.0775 area was worth observing. In fact, sellers have been unable to get through it for quite a few weeks. Theoretically, attempting to engage in longs in a support area, or even at current levels, seems to make sense. The potential for rebound on the daily chart is large (attention can be drawn even to a range of up to 1,1240). Assuming placing SL below 1.0775, we get a very attractive risk-reward ratio.
Elapsed time and number of attempts
If, in turn, look for risk in such a scenario, warning signals appear from the passing time. You must remember that we operate on charts not only on the price, but also on the X axis, i.e. time. It is usually the case that when the market finds support, it will confirm it many times, but it will get stuck for a long time, each subsequent attempt to move away from it is getting weaker. We usually say then that the market “sticks” to support. Similarly in this case. This does not mean, of course, that buyers will not be able to cope with price increases, but you must be aware that the more often the market returns to support and the smaller the next rebound, the greater the chance of breaking the support level defended in an increasingly weaker style.
Although the risk-reward ratio for buyers in this area is very favorable (assuming a target within 1.1240 and SL under 1.0775), the prolonged problems with rebounding should be qualified as arguments weakening the entire setup. The situation would improve after breaking one of the closest resistance. The closest one is within 1.0880. Some of the more cautious traders, instead of trying to buy on support, may try to buy a 1.00880 break, or wait for a return move from above.
