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Forex: Ideas You Can Trade - EURUSD Curvature of Recent Trend is Revealing

Posted by Steven Hatzakis on Feb 5, 2015 4:14:00 PM

EURUSD: Curvature of the Recent Lows Drawn From The January 25th Floor Point Towards Weakening Support 

The medium term daily candle chart below shows the price history of the Euro currency (EUR) versus the United States Dollar (USD). This currency pair is known as EURUSD, and is trading near 1.1472 around time of publication, and near session highs.

Last time EURUSD was reviewed in Ideas You Can Trade, earlier last month, the question was "how lower can the pair go?" and a longer-term weekly chart showed that the bottom support line of a long-term bearish channel existed - and could bring the pair towards par in the near term.

With volatility looming in forex markets following an array of central bank surprises, geo-political uncertainties and significant choices still remaining to be made within the Euro-zone, the next move for the currency pair seems equally uncertain (especially if there is a major correction in the US Dollar). 

However, after reaching its January 25th multi-year low under 1.1100 the EURUSD has since barely recovered yet is starting to gradually reveal a curved momentum drawn from the lows of each session since- with the next phase of the circular shape pointing lower (see below). Despite this, support has been maintained over the last week near 1.1300 and is a key area to watch now - especially if 1.1500 is missed.

The circular sphere plotted on the chart below highlights the shape of the support which is curved - and if followed further - we may see the pair reset near that prior low of last month. 

If the above mentioned bearish fate is to be avoided, at least for now, the less bearish trend line just above this week's high (near today's high) will need to be broken-through, as the EURUSD is still caught between two bearish lines (the former just mentioned and the latter of which is the much steeper one that acted as support on January 25th) as can be seen in the chart below. 

Below are examples of how to trade a bearish continuation or a bullish reversal:

1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.1549 with a Limit to take profit @ 1.1699 and a stop-loss @ 1.1419 Risk/Reward Summary: Limit risk = +150 pips profit / (-130) Stop-loss risk = Gain to Loss ratio = 1.15

2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.1298 with a Limit to take profit @ 1.1147 and a stop-loss @ 1.1449 Risk/Reward Summary: Limit risk = +151 pips profit / (-151) Stop-loss risk = Gain to Loss Ratio = 1.00

Medium Term Daily Candle Chart:

EURUSDDaily February 5 2015 note

Topics: EURUSD, EURO, forex trading, technical analysis, USD, $EUR


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