EURUSD: Sharply Lower in Today’s Trading Session after Failing to Hold 100% Fibonacci Level
The medium term chart below shows the Euro currency (EUR) versus the United States Dollar (USD); this currency pair is known by the EURUSD symbol. The pair is currently trading 1.3588 and sharply after failing to hold above a 100% Fibonacci retracement level during today’s opening near 1.3723. The pair is trading at new lows as of publication.
This will mark the 5th trading daywhere the EURUSD has closed lower, after having reached a new medium term high near 1.3830 last week which is a level that hadn’t been touched since February 2013 by the pair. Apparently the failure to break above that level coupled with the lack of support during today’s opening, drove the prices past a medium term resistance line (parallel to point 5 in dark red on chart) where it is still looking for a target support near 1.3600. A short term bearish trend line (such as point 6) may be developing that could guide the pair near static support around 1.3480 or closer to a developing short term bullish line (parallel to point 2).
Unless an equally sharp bullish reversal followed and the pair was able to regain the short term bullish channel (point 2) and continue higher, the pair looks to be in a period of consolidation before moving higher within the this medium term trend.
In a previous article the possibility of a short term bearish channel (such as point 6 in magenta) that could develop with a target of the very long term bearish resistance level (point 5) back near the 61.8% Fibonacci level close to 1.3340 near early November was noted and remains valid for the EURUSD.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.3740 with a Limit to take profit @ 1.3829 and a stop-loss @ 1.3709 Risk/Reward Summary: Limit risk = +89 pips profit / (-31) Stop-loss risk = Gain to Loss ratio = 2.87
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.3565 with a Limit to take profit @ 1.3509 and a stop-loss @ 1.3599 Risk/Reward Summary: Limit risk = +56 pips profit / (-34) Stop-loss risk = Gain to Loss Ratio = 1.64
Medium term daily candle chart: