The EUR/USD rally
strongly higher towards 1.2400 (with a high at 1.2391) as the U.S. Dollar Index
sunk to 82.36 after Thursday 83.61 high. The dollar weakness has presented an
opportunity for euro bears: Short into today’s strength as it corrects what has
been an overall downtrend in the pair.
The short entry is built on the back
of the daily chart which reflects the dominant bearish Directional Bias of the
pair and this downtrend can be defined by the “four to six o’clock” 34EMA Wave
as well as the red GRaB candles that had dominated the downtrend.
Two things keep me from looking to get
long on the daily chart and that is the 50DMA and the other is the 1.2400
level. The fact that the major psychological level held is the first clue that there
was enough selling pressure around the “00” to keep the momentum from climbing
through this key resistance level.
The green GRaB candle does make me
pause but there is muted risk on this swing short since I will keep my stop
loss tight and that means I will use the 50DMA as the level at which I expect
selling pressure to keep the EUR/USD from making an all-out reversal of the daily
downtrend.
Past performance is not indicative of
future results
The
downtrend has been challenged but with the 1.2400 and 50DMA levels still
overhead, there is a swing short set up that will capitalize on a dollar
recovery and or euro weakness.
For traders uncomfortable with
expecting the dollar to strengthen – especially since the daily chart has
transitioned from the uptrend to a sideways market trend – remember that the
dollar needs only to outpace the euro to push the EUR/USD lower. Mario Draghi
did the single currency no favors with an overdramatic, overreaction to
increasing Spanish bond yields and set the market up to an inevitable
disappointment. No doubt the much better-than-expected job number has pushed
the U.S. equities market higher and therefore (in the typical push-pull) pressured
the greenback lower but how long with this story linger in the news cycle
before Europe takes front and center again. That’s what this play is all about
and keeping a tight stop loss will prevent EUR/USD bears from getting run over
by the bullish momentum that will likely be waiting north of the 50DMA.
As an
active forex trader and Chief Currency Analyst for InterbankFX.com I do write
for a number of sites all over the web and I am happy to say that I will be
posting updates atwww.IBFXconnect.com. MyActivity Boardwill feature the trades from my trading account as well as
intraday commentary.
Start the discussion! Questions?
Comments. Leave it here at the Daily Forex Trading Edge for Raghee to
personally answer. Using the icons at the top of the article to forward this
update to a friend via email, post it on Google or Facebook or simply print it
out for reading later.
Forex trading is one of
the riskiest forms of investment available in the financial markets and
suitable for sophisticated individuals and institutions. The possibility exists
that you could sustain a substantial loss of funds and therefore you should not
invest money that you cannot afford to lose.
Posted By:
Raghee Horner
Raghee Horner, chief currency analyst for IBFX, provides her personal daily trading tips and insights through Dailyforextradingedge.com. An experienced trader with over fifteen years in the markets, Raghee is the co-founder of EZ2Trade Software and has taught her brand of technical analysis and charting strategies to students all over the world. She is an international author and has taught currencies, futures, and equities trading for over a decade.
The EUR/USD rally strongly higher towards 1.2400 (with a high at 1.2391) as the U.S. Dollar Index sunk to 82.36 after Thursday 83.61 high. The dollar weakness has presented an opportunity for euro bears: Short into today’s strength as it corrects what has been an overall downtrend in the pair.
The short entry is built on the back of the daily chart which reflects the dominant bearish Directional Bias of the pair and this downtrend can be defined by the “four to six o’clock” 34EMA Wave as well as the red GRaB candles that had dominated the downtrend.
Two things keep me from looking to get long on the daily chart and that is the 50DMA and the other is the 1.2400 level. The fact that the major psychological level held is the first clue that there was enough selling pressure around the “00” to keep the momentum from climbing through this key resistance level.
The green GRaB candle does make me pause but there is muted risk on this swing short since I will keep my stop loss tight and that means I will use the 50DMA as the level at which I expect selling pressure to keep the EUR/USD from making an all-out reversal of the daily downtrend.
Past performance is not indicative of future results
The downtrend has been challenged but with the 1.2400 and 50DMA levels still overhead, there is a swing short set up that will capitalize on a dollar recovery and or euro weakness.
For traders uncomfortable with expecting the dollar to strengthen – especially since the daily chart has transitioned from the uptrend to a sideways market trend – remember that the dollar needs only to outpace the euro to push the EUR/USD lower. Mario Draghi did the single currency no favors with an overdramatic, overreaction to increasing Spanish bond yields and set the market up to an inevitable disappointment. No doubt the much better-than-expected job number has pushed the U.S. equities market higher and therefore (in the typical push-pull) pressured the greenback lower but how long with this story linger in the news cycle before Europe takes front and center again. That’s what this play is all about and keeping a tight stop loss will prevent EUR/USD bears from getting run over by the bullish momentum that will likely be waiting north of the 50DMA.
As an active forex trader and Chief Currency Analyst for InterbankFX.com I do write for a number of sites all over the web and I am happy to say that I will be posting updates at www.IBFXconnect.com. My Activity Board will feature the trades from my trading account as well as intraday commentary.
Start the discussion! Questions? Comments. Leave it here at the Daily Forex Trading Edge for Raghee to personally answer. Using the icons at the top of the article to forward this update to a friend via email, post it on Google or Facebook or simply print it out for reading later.
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.
Raghee Horner