EURUSD: Short-Term Bullish Momentum Nearing Very Long-Term Bullish Resistance
The medium term chart below shows the Euro currency (EUR) versus the United States Dollar (USD); this currency pair is known as EURUSD. The pair has been ascending a steep short term bullish support line (point 1 on chart in white) over the past week and is trading near 1.3298 (as of publication) and just off session lows near 1.3255. The high of the session 1.3323 is the same high of yesterday’s session and both appear to coincide exactly on a very long term bullish resistance line (point 4 in red) - which could provide a barrier to further upside – in the near term.
In early August 2013 in a previous article on the pair, the continuation that followed in a short term bearish channel (point 8 on chart in magenta) - after the reversal on medium term bearish resistance (point 7 in yellow) occurred as discussed. The channel (point 8) has since been shifted on the updated chart below to reflect a less steep angle. Then support was eventually encountered - as foretold - upon the medium term support line (point 3 in green). This enabled the EURUSD to ascend along its current trajectory on the steep bullish support line (point 1) which looks consistent with the slope of prior such lines.
If long term resistance (point 4) can be overcome, a bullish continuation along the very short term steep trend-line (point 1) may continue with its trajectory intersecting the medium term bearish resistance line (point 7) which will intersect also with the support line of the short term bullish channel (point 2 in blue). Further momentum may be tested on the very long term bearish resistance line (point 5 in dark red) just above.
A failure to hold the current steep trend line (point 1) and/or the failure to overcome the very long term bullish resistance (point 4) could reverse the momentum down a bearish line (such as point 6) with target first near the 50% Fibonacci retracement and further support near the medium term support line (point 3) just below.
Contrarians may be placing sell orders expecting a reversal, whereas trend-followers may do the opposite expecting a continuation:
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.3340 with a Limit to take profit @ 1.3399 and a stop-loss @ 1.3309 Risk/Reward Summary: Limit risk = +59 pips profit / (-31) Stop-loss risk = Gain to Loss ratio = 1.90
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.3251 with a Limit to take profit @ 1.3205 and a stop-loss @ 1.3281 Risk/Reward Summary: Limit risk = +46 pips profit / (-30) Stop-loss risk = Gain to Loss Ratio = 1.53
Medium term daily candle chart: