EURUSD: Support Faltering as Volatility Subdues Bullish Price Momentum
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 near 1.3436 and almost 150 pips lower in today's trading session range which reached a high of 1.3563 to a low of 1.3414 (as of publication) after opening at 1.3561.
Support had been building in recent weeks following a steep drop that was reversed on the long term bearish support line (point 5 in dark red) that was noted as intersecting with other lines that together could provide sufficient change for even such a steep drop in prices.
That drop subsequently followed our last post of the EURUSD in the Ideas You Can Trade series, over the past two weeks, and may be looked at as a dead-cat bounce since the sharp drop today indicates that the EURUSD is losing any short term bullish momentum (such as along point 1 in white on chart).
Unless the volatility of today's session can be followed by an equally volatile move in the opposite direction, and effectively regaining the steep short term bullish line (point 1), the short term bearish momentum looks to be resuming (down point 6 in magenta).
The confluence of support that had previously reversed the bearish momentum may be tested again with a target of the current trajectory meeting near the 61.8% Fibonacci retracement level around 1.3345, as discussed in the previous article mentioned above. This could happen before enough support is gained to pivot and return higher (unless such support failed).
A Longer term weekly candle chart, that has been provided further below, paints a similar picture while emphasizing some of the long term behavior of the pair and different Fibonacci levels that come in to play on a weekly candle chart.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.3572 with a Limit to take profit @ 1.3651 and a stop-loss @ 1.3501 Risk/Reward Summary: Limit risk = +79 pips profit / (-71) Stop-loss risk = Gain to Loss ratio = 1.11
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.3398 with a Limit to take profit @ 1.3349 and a stop-loss @ 1.3419 Risk/Reward Summary: Limit risk = +49 pips profit / (-21) Stop-loss risk = Gain to Loss Ratio = 2.33
Medium term daily candle chart:
Longer term weekly candle chart: