EUR/USD made a huge gap down from the 1.3100 area to below 1.3000 over the weekend. 

The sudden rally that took place during the last two trading days of the previous week can be explained by a quick short squeeze as traders decided to book profits around the pair’s previous lows.

However, sentiment for the euro zone remains negative as the pair opened this week right where it was prior to the short squeeze. Before the pair trades any lower though, traders could take advantage of this potential gap close back to the 1.3050 minor psychological resistance.

There’s a falling channel on the 4-hour time frame, right where the pair closed last week. A short trade on a pullback to the 1.3000 or 1.3050 area with a stop above 1.3100 and a target around the pair’s previous lows could work for today as the euro zone has no major catalysts on schedule.

By Kate Curtis from Trader’s Way