EUR/USD: Price bouncing back from the low edge of month’s range
Yesterday’s signals were not triggered as unfortunately there was insufficiently bearish price action when the resistance level identified at 1.1881 was reached, although the trade would have been nicely profitable and valid on a short time frame.
Today’s EUR/USD Signals
Risk 0.75%.
Trades may only be entered between 8 am and 5 pm 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 1.1790, 1.1820, 1.1854, or 1.1881.
- 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 1.1745 or 1.1685.
- Put 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.
- 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 we have been seeing a broad consolidation between 1.1750 and 1.2000 for some time, and a narrower consolidation within that between the round numbers at 1.1800 and 1.1900. I thought these narrower levels would hold until the FOMC release and I was correct.
The FOMC release was more pessimistic on the economy than had been expected, and although its forecast of effectively zero interest rate remaining for the next 3 years could be expected to be bearish for the U.S. Dollar, the risk-off effect of the statement was enough to send riskier assets tumbling and push quite a lot of money flow into the U.S. Dollar as a safe haven.
This was enough to send the EUR/USD to the lower edge of its recent multi-week consolidation range. The support level at 1.1745 marks the lower boundary of this range and is also confluent with the major psychological quarter-number at 1.1750, so it is no surprise we saw a v-shaped bullish bounce there during the Asian session.
There is no reason to assume that 1.1745 will break down today, so the next technical clue is likely to come when we see the price hit one of the resistance levels identified above. Still, the bullish v-shaped bounce is strong.
I think it may be that there will not be any good opportunities in this pair today, with the opportunity already playing out.
There is nothing of high importance regarding either the USD or the EUR.