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Forex: Ideas You Can Trade - EURCHF Tests Below Medium Term Support

Posted by Steven Hatzakis on Aug 27, 2013 9:46:00 AM

EURCHF: Medium term bullish channel fails and hovering near session lows

The medium term chart below shows the EURCHF pair failing to hold onto the support line of the medium term bullish channel (point 3 on chart) and trading just below on a parallel bullish support line in the current session near the low of the day near 1.2278 (as of publication trading near 1.2289).

The bearish momentum overall was discussed in a previous article where the pair has since encountered resistance on a very short term steep bearish trend line (point 5) as it descended along the bearish resistance line of the short term medium term channel (point 1) after not being able to break above the upper resistance line just above and parallel to it.  

If the medium term bullish channel (point 3) and the support line just below (where the pair is trading now) fails to reverse the bearish momentum, then a continuation may follow down the very short term steep bearish trend line (point 5) with a target of the lower support line of the short term bearish channel (point 1) - which if also failed - could cause the pair to target the long term bearish resistance line (point 4) intersecting near 1.2000 by mid September 2013.

If the medium term bullish channel (point 3) can be regained or support found upon the resistance line of the short term bearish channel (point 1) then a reversal could follow up a short term bullish trend line which could develop with a slope similar to prior such lines (such as point 2) and with a re-target of the resistance line parallel to the upper side of the short term bearish channel (point 1) near 1.2350 by early September 2013.

 Below are examples of how to trade a bearish continuation or a bullish reversal:

1.  BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.2309 with a Limit to take profit @  1.2360 and a stop-loss @ 1.2280 Risk/Reward Summary: Limit risk = +51 pips profit / (-29) Stop-loss risk = Gain to Loss ratio =  1.75

2.  BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.2269 with a Limit to take profit @ 1.2206  and a stop-loss @ 1.2324 Risk/Reward Summary:   Limit risk = +63 pips profit / (-55) Stop-loss risk = Gain to Loss Ratio = 1.14

Medium term daily candle chart:

eurchfdaily august 27 2013 note
 

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