Daily Outlook: Risk aversion is back on with a vengeance in the opening ours of the EU pair this week, and that apparently still benefits the USD (we’ll leave it up to you to debate the merits of the USD as a ‘reserve currency’). We took advantage of the pairs weakness all of last week, and that looks to stick as our strategy for now as the pair threatens strong daily support:
The strong daily support (green line on chart above) is in the process of being broken with a sustained break below 1.4150 necessary to confirm the break. For more conservative intraday traders we need a daily close below 1.4150 to confirm the bearish outlook. Zooming into the 1h chart we can see some of the particular setups we will be watching today:
The last candle actually confirmed the break below the consolidation wedge (last two yellow lines in a downward facing triangle) we were watching on the 1h charts for those traders watching the same wedge. Since this wedge has been broken to the downside we are looking for opportunities to get short below 1.4200 on a solid candlestick signal. The pair is oversold and fighting with major support, however, so we will also look for an opportunity to get long on a sustained break above 1.4200 (falling trend resistance from the consolidation wedge).
Trading Idea: In general we are looking for opportunities to get short below 4200, so our primary trade is a short below 1.4200 (assuming we get a rally back up to this level) with candlestick confirmation and targets back down to 4175, 4150, 4120, 4090 for 110 pips potential.
As we detailed above there are reasons to doubt the bears can keep this up forever so we would consider any break above 1.4200 a bullish sign and look to get long there with targets at 4225, 4250, 4275 and 4300 for 100 pips potential.
As the pair continues to fall throughout the day we will look further developing S/R lines to trade as well as solid candlesticks (especially bearish signals) from CP to trade off of.
