EUR/USD: Break below support likely to trigger deeper retracement
Yesterday’s signals produced a losing short trade from the bearish pin candlestick which rejected the resistance level identified at 1.1277.
Today’s EUR/USD Signals
Risk 0.75%.
Trades may only be entered before 5pm London time today.
Short Trade Ideas
- Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.1517.
- Put 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.
- Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.
Long Trade Ideas
- Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.1328, 1.1269, or 1.1222.
- Put 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.
- Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.
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 yesterday that it seemed likely that the long-term bullish trend was over. I expected a bearish move was most likely due to prevailing market sentiment, so I wanted to take a bearish bias here if we got two consecutive hourly closes below the support level at 1.1222.
I was wrong about the direction, as market sentiment reversed strongly to become risk-on. However, I was right to see 1.1222 as a pivotal point, as the price never even touched that level, let alone broke below it.
The technical picture now is more bullish and as London opens, we see the nearest support level at 1.1328 holding and being used to push the price up higher. If the price is above 1.1350 at 9 am London time, it will be likely to continue to rise so I will take a bullish bias if this happens. There is potential resistance above but no obvious key levels until 1.1500 or so, therefore the price has room to rise.
The Euro is stronger than the British Pound, which is another reason to be bullish if the price breaks up. I see 1.1328 as a pivotal point for the day as if it breaks down, we will be likely to see a deeper bearish retracement.
Regarding the USD, there will be a release of Retail Sales Data at 1:30pm London time, followed by testimony from the Chair of the Federal Reserve before Congress at 3pm. There is nothing of high importance scheduled today concerning the EUR.