Yet resistance at $1.1456 may prove to be strong.
Last Week’s Wednesday EUR/USD signal was not triggered as there was no bearish price action when the price first reached the resistance levels identified at $1.1316 and $1.1336.
Today’s EUR/USD Signals
Risk 0.75%.
Trades must be taken before 5pm London time today only.
- Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.1456 or $1.1514.
- Place the stop loss 1 pip above the local swing high.
- Move the stop loss to break even once the trade is 20 pips in profit.
- Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.
Long Trade Ideas
- Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.1394 or $1.1353.
- Place the stop loss 1 pip below the local swing low.
- Move the stop loss to break even once the trade is 20 pips in profit.
- Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
EUR/USD Analysis
I wrote on Wednesday last week that we had a close fight between bulls and bears and it was hard to tell who is going to win over the medium term. I thought that the best potential trade would be a long from $1.1261 or $1.1250. Although those levels were never quite reached, I was correct to see the best odds as on the long side, as has been proven by the slow rise over the past week leading to yesterday’s breakout beyond the $1.1400 area.
The Forex market is clearly dominated by weakness in the US Dollar, which has been prevalent for some days, and was driven technically by a longer-term rejection of a key resistance level in the US Dollar Index. This weakness was confirmed yesterday by the increasing pace of US CPI (inflation) which has had the effect of sparking a further selloff in the US Dollar. Almost every currency has risen against the USD in recent hours and the euro is no exception despite its recent relative weakness as a currency, which can be clearly seen when you look at a chart of EUR/GBP for example.
It looks like the odds are clearly with the bulls on the long side, but the US Dollar Index is sitting in a potentially supportive price zone now and looking at the price chart below we can see the price has been held over recent hours by the resistance level at $1.1456. I am not convinced that we will see a break above this level today, but I think the best potential is still on the long side. Therefore, my ideal longer-term setup for this currency pair would be a retracement to the support level at $1.1394 with a bullish bounce there. In the meantime, a short scalp from a bearish rejection of $1.1456 is likely to be the best opportunity, but probably will need to be taken and managed on a short time frame.
Concerning the USD, there will be a release of PPI data at 1:30pm London time. There is nothing of high importance scheduled regarding the EUR.
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