EURUSD: Unless Long Term Bullish Support Line Holds, 1.34 then 1.33 could be next
The medium term daily candle chart below shows the price history of the Euro currency (EUR) versus the United States Dollar (USD), known as EURUSD, and trading near 1.3650 today around time of publication today.
Last time EURUSD was discussed in the Ideas You Can Trade series, 1.3550 was mentioned as a target as support near higher levels was faltering. Last week 1.35 was briefly reached before a reversal followed but that was short-lived or a dead cat bounce where the bearish momentum has now resumed with EURUSD poised to trade lower.
If 1.35 is breached, and the very long term bullish resistance line (point 4 in red on chart below) - which is now acting as support happens to fail, then the next stop could be a swift or gradual descent towards 1.33.
The prospects for a reversal of the downtrend remain on the above mentioned long term bullish resistance line, and the long term bearish resistance line just below it, as well as near 1.3480 where support was found in early February 2014.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.3570 with a Limit to take profit @ 1.3601 and a stop-loss @ 1.3549 Risk/Reward Summary: Limit risk = +31 pips profit / (-21) Stop-loss risk = Gain to Loss ratio = 1.47
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.3492 with a Limit to take profit @ 1.3472 and a stop-loss @ 1.3511 Risk/Reward Summary: Limit risk = +20 pips profit / (-19) Stop-loss risk = Gain to Loss Ratio = 1.05
Medium Term Daily Candle Chart: