By: John Ursus
Timeframe: W1
Recommendation: Long Position
Entry Zone: 1.2125 – 1.2175
Take Profit Zone: 1.3025 – 1.3075
Stop Loss Zone: 1.1925 – 1.1975
The EURUSD has been exposed to a sharp correction over the past twenty-eight trading weeks. After a breakout above 1.4000 failed a range of economic data released out of the Eurozone lend support to the case for a much weaker Euro. The correction took this currency pair from an intra-day high of 1.3993 to an intra-day low of 1.2123 where the EURUSD currently trades while it is approaching a major double bottom formation. This currency pair could face a short-covering rally from extreme oversold territory.
The sell-off took the EURUSD well below its 38.2 Fibonacci Retracement Fan, and forex traders should look out for a sharp reversal as the double bottom formation is forming. A short-covering rally is expected to take the EURGBP back into its 38.2 Fibonacci Fan from where more upside is possible. Forex traders are advised to spread their entries over a 50 pips range between 1.2125 and 1.2175. The downward potential appears to be rather limited while the upside potential remains very attractive.
