Daily Outlook: There’s a battle raging on 1.40 right now as bulls and bears are locked in a struggle to determine the outcome of the cure. Bears have been the obvious victors over the past couple weeks, pushing the pair down as low as 1.3836 yesterday before bulls rebounded slightly (or bears took some profit off the table) to 1.40 where we are now forming a consolidation triangle:
The consolidation triangle itself is in a little bit of an odd spot as it is difficult to tell if the overall downtrend is the “flag” or if the recent bounce from 1.3836 to 1.4053 is the flag pole. We are inclined to say that the “flag pole,” if we need one, is the upswing from 1.3836 – which would mean we will go long on a break above 1.4040 – but the recent downtrend has been so strong we will also take a short on a sustained break below 1.3970.
Trading Idea: Primary trade is a short on a sustained break below 1.3970 with targets at 1.3950 (tight first target on this breakout), 3925, 3900 and 3870 for 100 pips. We will also look to get long on a sustained break above 4040 with targets at 4060, 4085, 4110 and 4140 for 100 pips.
As the day goes on and the consolidation triangle narrows our entry points will tighten in a bit. We will also look for new S/R trend lines that develop intraday and CP candlesticks worth trading of course.
