EURUSD: Bullish momentum reverses after failing to hold on long term resistance
The medium term chart below shows EURUSD ascending a short term bullish channel (point 2 on chart) after an aggressive reversal on a long term bullish support line (point 8) – which was noted as a possible event in a previous article - where it has now encountered a very long term bullish resistance line (point 4) and also managed to barely touch medium term bearish resistance (point 7) in the previous sessions high.
The current daily candle is bearish as of this writing with EURUSD trading near session lows near 1.3200 – a key static level intersecting also near the support line of the short term bullish channel (point 2). If support is maintained on this line, a bullish continuation may follow similar in slope to steep short term bullish momentum (point 1) .
If the very long term bullish resistance line (point 4) and medium term bearish resistance line (point 7) can be both overcome, the EURUSD may target the very long term bearish resistance line (point 5) which could coincide near 1.3400 in the short term.
If the short term bullish channel fails, the pair may follow down a short term bearish channel (point 6) and may target the medium term bullish support line (point 3) intersecting near 1.3000 in the short term with long term bullish support (point 8) further below. A long term chart is also provided below as reference (weekly candles from 2010).
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .1.3305 with a Limit to take profit @ 1.3339 and a stop-loss @ 1.3277 Risk/Reward Summary: Limit risk = +34 pips profit / (-28) Stop-loss risk = Gain to Loss ratio = 1.21
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.3179 with a Limit to take profit @ 1.3128 and a stop-loss @ 1.3219 Risk/Reward Summary: Limit risk = +51 pips profit / (- 40) Stop-loss risk = Gain to Loss Ratio = 1.28
Medium term daily candle chart:
Long term weekly candle chart below: