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Forex: Ideas You Can Trade - EURUSD High Volatility Resuming

Posted by Steven Hatzakis on Mar 19, 2015 10:08:00 AM

EURUSD: From 1.06 to 1.10 and back overnight shows that volatility is resuming for the Euro currency against the US dollar

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 1.0678 around time of publication today.

Last time EURUSD was reviewed in Ideas You Can Trade on March 10th, a fresh low had been reached and the trend was still bearish, and had subsequently traded lower with 1.04 reached last Friday. 

Yesterday, EURUSD shot up towards 1.10 as the USD had pulled-back across the board following a statement from the FOMC, yet the pair has returned towards 1.06 literally overnight - as high volatility is resuming in forex markets driven by the quick move in the US dollar since yesterday.

Based on the widening bearish channels on the chart below, while EURUSD could be approaching a floor where a significant reversal may occur, a lower-low could be reached first before that reversal happens. On the other hand - a false recovery back towards 1.10 or higher - could precede an even bigger drop (compared with yesterday's move up and then down) as high volatility could cause stops to be taken out first before the market turns the other way (and therefore caution may be needed if high volatility continues).

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

1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.0940 with a Limit to take profit @ 1.1029 and a stop-loss @ 1.0851 Risk/Reward Summary: Limit risk = +89 pips profit / (-89) Stop-loss risk = Gain to Loss ratio = 1.00

2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.0535 with a Limit to take profit @ 1.0450 and a stop-loss @ 1.0612 Risk/Reward Summary: Limit risk = +85 pips profit / (-77) Stop-loss risk = Gain to Loss Ratio = 1.10

Medium Term Daily Candle Chart (Zoomed-in):

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


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