The EUR/USD Daily Floor Could Hold the Key to Multiple Entries
Looking at the daily EUR/USD it would be easy to presumptuously bearish but there is a layer of support that bulls could take advantage of in the near term as that time frame approaches “oversold” status.
The daily time frame is trading within a range, and because of this the tact to take would be to look for levels at which buying support would build.
The layers of support are not tight and this means the wide variance between the multiple lows will add an element of unpredictability to ultimately where the bounce could occur.
Using the Stochastics could help narrow down where the bearish momentum sentiment could shift into support.
The idea behind the set up is not to trigger a distribution fade entry long alone but also look to downtrends on the 60 and 240-minute charts for an opportunity to short into a bounce.
The downtrends on both these charts are reflecting weakness and push to lower lows that have carried the pair to these depths of the range on the heels of the pessimism from Draghi and the weak Spanish auction.
At a moment in time where a strong ADP number and ECB optimism could have shifted what has been a transition in the risk environment, the bad news out of Europe seemed to give bears another reason to stand tall. However I don’t think the EUR/USD is going to break this wide range and therefore expecting exhaustion and a move back higher can be capitalized on two ways.
First is the aforementioned distribution fade – which admittedly will be both an aggressive and challenging set up.
Second however is the swing short that could be triggered by the correction higher. The question is whether selling pressure will come in at 1.3100 or 1.3200. If the 1.3100 level is in play, look for a swing short on the 60-minute chart between the 20 period SMA close and 34 period EMA low (the swing short zone).
If momentum persists through this psychology “00” level, be ready for the 1.3200 to be the next hurdle and potential exhaustion level for the bulls; the 240-minute chart’s downtrend will be well-suited to set up a swing short based on its 20 period SMA close and 34 period EMA low.
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