After last week’s freefall, the euro has stabilized slowly over the past three trading sessions. The pause in bearish momentum however may continue since today’s economic release regarding inflation in Germany may also help revitalize fears of deflation. The bearish correction that has been in place since October 25th may continue and this tentative rebound may be short-lived.
Price action on the 60-minute chart on the EUR/USD displays multiple bearish technical patterns and key resistance levels. The first pattern highlighted in pink is a bearish Gartley Pattern. The second pattern outlined in white is a bearish Butterfly pattern. Key resistance also may target the 50-day simple moving average which resides at 1.3509.
When identifying chart patterns, it is not unusual to see multiple patterns identify a key reversal area that many algorithms may use to target their entries. Currently the 1.3475 area may confirm point D, for both the Butterfly and Gartley patterns. If valid, we may see an immediate reversal once price reaches this region.
The trade: Sell EUR/USD if price rallies to 1.3473, with a stop loss at 1.3523, and a take profit at 1.3321. The Risk/Reward Ratio is 1:3.
Edward J. Moya
WorldWideMarkets Online Trading